By Wayne Nunziata, President, Colonial Surety Company

On the heels of a difficult 2021 in which nonresidential construction segment spending observed the largest ever year-over-year decline, public works contractors have cause for optimism, especially when factoring in President Biden signing the Inflation Reduction Act that includes $60 billion for clean energy manufacturing and the $1 trillion infrastructure bill. To compound this existing situation, we now have to also factor in the Florida (and South Carolina) damage done by Hurricane Ian, with early estimates of $50-60 billion in insured losses, and another $20-$40 billion in uninsured (essentially, flood) damage, which will keep contractors or all types busy for many months to come. However, as commercial construction companies jump into rigorous competition for contracts, they must also grapple with higher prices, continuing supply chain challenges, a labor shortage, and inflation. In this era of exceeding complexity, there has never been a more urgent need for speed and certainty in construction. More construction companies across the value chain are deploying digital technologies to get a clearer picture of project operations, to optimize asset efficiency, to manage risk – anything to produce a competitive edge against those firms still resistant to digitization. Bidding/bonding is a critical area in which digital solutions can help a contractor gain a competitive advantage at the inception of the project.

Switching from manual to automatic for speedy bids

As any contractor can attest, the manual process to get bids and performance bonds involves a tedious process of sending the bid invitation letter, job specifications, and bid request forms to their insurance agency, which would get an offer from a surety bond company after credit and lengthy background checks. If the contractor wants to submit another, higher bid, the agent will request more information, resulting in an endless back and forth. The faster a contractor can get qualified and obtain a bid bond, adjust bids, update work in progress, obtain additional credit, and order performance and payment bonds, the better position they are in to win jobs. Technology platforms now make it possible for contractors to go online and swiftly and accurately acquire, control, and keep track of bid, performance, and payment bonds.

Getting a handle on cost deviation and inflation to make accurate bids

Since most contractors operate on slim margins in a highly competitive marketplace, contractors must master the bidding process not only by submitting winning bids but also accurate bids in line with fluctuating costs. Construction costs skyrocketed by 17.5% year-over-year from 2020 to 2021, and are expected to increase by 14.1% YoY by the end of 2022. Incorrectly building future costs into bids can be potentially catastrophic.. Executives need ways to make swift bidding decisions from an array of disparate data. Supply chain delays can lead to a disrupted timeline, so construction executives are turning to project control and cost management software that can crunch the numbers in real-time so leaders can eliminate surprises and make informed decisions. Contractors can also use digital solutions to instantly see where they stand with their current and aggregate bonding limits.

Power of attorney for agility in bidding and bonding

Contractors with their own powers of attorney can move faster in obtaining bid bonds and seize more control of their own destinies instead of relying on middlemen who may be motivated by commission. Traditionally, the insurance agent would have power of attorney, know what the bid is (and sometimes

see competitors’ bids too), and issue the bond. New software solutions allow insurance providers to grant power of attorney directly to contractors, enabling them to issue their own bid bonds and order performance and payment bonds instantly online. When you’re online, nobody knows your bid except you and the company. There’s no intermediary, enabling contractors to be nimbler in executing a competitive bid in an atmosphere in which bids need to come in up to the 11th hour and razor-thin margins determine wins and losses.

A future ripe with opportunity but fraught with complexity

In the commercial construction business, leaders need fingers on the pulse of their surety lines, work on hand, claims and standing—every day and in real time. Contractors need to be able to appraise their financial situation on demand. Digital tools are available that can help a contractor have a clear and constantly updated view of financial statements, credit scores, bid history, and open bond liability. The construction industry has been one of the most reticent to move toward digitization. Not coincidentally construction has shown only slim growth in productivity of about 1% In the last two decades. A McKinsey & Co. survey suggested that digital transformation can result in cost reductions of 4% to 6%. In an industry enduring low profitability and thin margins, executives cannot afford to neglect technologies that unearth optimizations and efficiencies buried in old processes.