Surety 101
The owner on a bond can also be called by this name
Obligee
This is used to ensure that a contractor will complete the project according to the terms of the contract, including quality and timelines
What is a performance bond
How do you calculate working capital?
Current Assets - Current Liabilities
How long of a warranty is typically included in the cost of a P&P bond?
1 Year
What does GAAP stand for?
Generally accepted accounting principals
A percentage witheld from the contractor by the owner/GC on each pay app is what?
Retainage
L&P, Judicial, Probate, Public Official's are types of what bonds?
Commercial
What are the three types of financials a CPA can provide?
Compilation, review, audit
What are the 3 C's of surety
Character, Capital, Capacity
This is commonly used to mitigate risk with subcontractors
What is bonding back
This is a contract between the Surety and the Principal that is intended to protect and reimburse the Surety for losses it suffers as a result of issuing bonds on behalf of the Principal
What is the GAI
What type of bonds are typically for 150% of the disputed amount
Release of Lien Bonds
The indirect costs of materials, equipment, buildings, or personnel needed to support the construction.
What is overhead
Per GAAP accounting this must be fully recognized when known
Job loss
Billings in excess of costs may also be called
Overbillings
You would execute this when two parties are looking for the same bond guarantee
Dual obligee rider
These types of bonds guarantee that the principal will restore the land to its original state after its operations are completed
What are reclamation bonds
A current asset is defined as
Something that can be converted to cash within 12 months
An amount charged to the contractor if they have not completed a project within the specified timeline of the contract
Liquidated Damages
Something that reduces the book value of equipment over time
Depreciation
What law requires contractors to post P&P bonds for federal construction projects over $100,000
The Miller Act (1935)
What bonds are written where the obligee is not a party to the contract
Subdivision Bonds
This involves tracking all costs associated with a specific project which helps contractors understand profitability and manage the project budget effectively
What is job costing
What is a common indicator on the WIP for unapproved change orders
Late stage underbillings
What tool reduces the risk of payment bond claims
Funds Control