PRIVATE CONTRACTS have some noteworthy differences when compared to public work. There are advantages and some risks to avoid. IBCS is a surety that can help when these opportunities arise.

Private Contracts. These are bonded contracts being performed for owners that are not public bodies. Could be a direct contract with a company (a “private owner”) that wants a new office building. It could also be a subcontract with a GC. Since the General Contractor is not a public body, all subcontracts are private contracts.

The potential flexibility of dealing with a private owner can be a refreshing change over the dictatorial requirements of public contracting officers. A private owner can unilaterally waive requirements. They can break a large contract into multiple phases that may be easily bonded, sequentially. In order to facilitate the bonding, the contract amount may be reduced by moving equipment or material purchases to the obligee for direct purchase.

They may exercise flexibility in the bond form required and even the size bond in relation to the contract (can be less than 100%). The ability to negotiate aspects of the contract and bonding requirements allows underwriters to support projects in novel ways.

The greatest risk associated with these contracts is the possible failure to be paid by the owner. Most contractors can ill afford to incur labor and material costs that are never recovered due to the obligee’s financial collapse. Bond underwriters seek to verify the private owners source of funds prior to issuance of the bonds.

Another risk: If a GC made up a bond form and contract, whom would the language favor? Sometimes private contracts and bond forms contain unique, onerous conditions that add enormous risk for the contractor. A safer alternative is to use the industry standard: AIA forms.

The IBCS Group is the Authorized Risk / Claims Manager for the Scarborough Bond and Guarantee Program. We are a surety dedicated to serving the construction industry. We feel private contracts fall into a category similar to Subcontracts: They are worth writing if handled properly.

Our surety bond underwriters are prepared to consider this business based on the acceptability of the contract, bond form and method of construction funding. Work with us closely on contracts up to $150,000,000 each. Our underwriters are always available: Days, nights, weekends and holidays. Nobody beats us on service!

Steve Golia is Executive Vice-President of the IBCS Group, a Surety dedicated to providing bid and performance bonds for contractors.

He is the point of contact and can be reached at 856-673-4135. http://www.IBCS.com