Expert Bid Evaluation Helps Surety Keep a Key Client
A 7MM bid spread prompted one of Guardian Group, Inc.’s largest surety clients to call upon our in-house experts. The surety understandably wanted to write a $19MM bond for their long-term contractor-customer, but the company and its underwriters were concerned that this contractor’s bid was simply too low for the tasks at hand.
The $50MM+ construction project involved a high school, and the contract was for the excavation work over one hundred acres. The scope of work included rock removal, site preparation for the building pads, grading for sports fields and parking lots, parking lot installation, storm sewers and site drainage. While the contractor’s in-house estimate was at $19MM, the other two bidders had estimated the job at $26 and $27 million. Rocky soil conditions required extensive fill material to support compaction requirements for the school, the ball fields, and the parking lots. Was their bond client missing something? Was the client putting the company (and his surety) at risk by aggressively (or naively) underbidding the project?
The surety called upon Guardian’s Surety Group to assist them to better assess the situation. Due to decades of prior service to them, they were well aware of Guardian’s expertise, especially in construction engineering. They knew they stood to benefit by leveraging the firm’s experience with site development for high schools, not to mention its nearly 30-year background with large footprint construction projects. Guardian’s engineers met with the contractor to evaluate the plans, specifications and bid tabs. In addition to performing a site review and evaluating “the iron in the yard” – the quantity and quality of the contractor’s own equipment, they interviewed the principal’s project team and evaluated their capabilities. A review of the company’s history showed it was a third-generation contractor that enjoyed a seasoned, loyal work force with an average tenure of 10 years.
Upon familiarizing itself with the contractor’s operations and project team, Guardian’s experts prepared an independent estimate, budget and construction schedule. Guardian confirmed that the contractors bid was good and advised the surety of the findings. This work provided the surety the necessary underwriting confidence to issue the bond, thereby supporting their contractor’s continued growth and success, as well as preserving a valued relationship.
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