Dear YouDig? Love Stinks

Buckingham, Doolittle & Burroughs, LLC

Buckingham, Doolittle & Burroughs, LLC

Dear YouDig?,
We are in the middle of a massive addition to our warehouse. The value is high seven figures in construction services. We don’t do this all the time but we fell in love with the Design-Builder, signed their form and asked them to proceed asap! Well it’s a year later and we are not in love any more. There are delays and excuses. Subs are calling us directly for payment. Frankly, we don’t see how this crew will be able to complete the work. We priced it and it looks like it will cost us 40% more to get a replacement contractor at this stage. We gave in and called our lawyer whose first question was “Is there a bond?” We never even thought of it. Are we fools?
-Love Stinks Ya Ya
Dear Stink,
You should have said “yes” to the bond and “no” to your lover. Your lover jilted you and you have nothing but the dispute resolution system and more expensive lawyers to fall back on. A performance bond guarantees you that the contractor will perform the contract. A payment bond guarantees you that the contractor will pay all of the subcontractors, laborers and materials associated with the job. Bonds are like any great system of protection – you many never need it and it costs you money. In most cases around between ½ – 1% of the price. Might have come in handy, huh, Stink?
Had you called your attorney before you signed the deal with your lover, you would have learned Rule No. 1 – Risk management is equally crucial at all stages of a construction project. Your risk management team, if you want to call it that, gambled and lost when they determined there was no reason to protect against the contractor failing to perform or pay. Now you have a bad taste in your mouth right? On your next deal, adjust your risk m anagement values and make the possibility of bonds part of it and your love will not be so stinky next time … YouDig?

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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