Background

In difficult economic times some risk transfer may be preferred by general contractor over risk retention, regardless of a project being qualified for Subguard. The exposures to owners are significantly improved where their general contractors have transferred risk over their retaining it. Particularly those situations where the retained risk proved to be more than the general contractor could bear.

The opportunity to improve the communication with the surety markets is directly related to the ability and the effectiveness of the risk transfer. Working collaboratively with the various trade associations working towards the implementation of the AGCxml open standards is that opportunity. The project data required is common to a wide group, and a perfect example of how collaboration could work for mutual objectives. Open standards allows that collaboration to be in the self interest of all participants, encourages competition and prevents proprietary systems from constraining services. It also provides the foundation for the surety based risk management program.

Since all modern contract accounting systems have the capability of generating a subcontractor report, and the specified data required for Project Status Connection is standard and common to them all, the report is a onetime set up requiring no special effort.

When the project progresses without incident, the effort to get the information to the surety will have as minor a consequence as what the surety does with the information.

If, however, a situation develops that does have the potential of escalating into a serious problem the surety will be able to detect it, and proactively respond. How they respond will be up to each surety and the particular situation, but it is safe to say that they will want to protect their interests by exploring ways to mitigate the risk.

While a surety is not generally obligated until a default is declared, they are experienced professionals and could be an invaluable resource in pursuing the common objective of risk mitigation.