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Miller Act

In the United States, the law requiring contract surety bonds on federal construction projects
is known as the Miller Act (40 U.S.C. §§ 3131-3134). The Miller Act is implemented through the Federal Acquisition Regulations (FAR) at 48 CFR Subpart 28.1. This law requires a contractor on a federal project to post two bonds: a performance bond and a labor and material payment bond. A corporate surety company issuing these bonds must be listed as a qualified surety on the Treasury List, which the U.S. Department of the Treasury issues each year.

The Miller Act, as implemented by the FAR, provides that, before a contract that exceeds $150,000[1] for the construction, alteration, or repair of any building or public work of the United States is awarded to any person, that person shall furnish the federal government with the following:

  1. A performance bond in an amount that the contracting officer regards as adequate for the protection of the federal government. The FAR establishes an amount of 100% of the contract price as the rule. An exception to this rule requires a specific determination by the contracting officer that a lesser amount provides adequate protection.
  2. A separate payment bond is required for the protection of suppliers of labor and materials. The amount of the payment bond must be equal to the total amount payable by the terms of the contract. The FAR establishes an amount of 100% of the contract price as the rule. A deviation from this rule requires the contracting officer to make a written determination supported by specific findings that a payment bond in that amount is impractical, in which case the amount of the payment bond shall be set by the contracting officer. The amount of the payment bond may not be less than the amount of the performance bond.

Payment security also must be provided when the contract is in excess of $30,000. Such security may be a payment bond or other forms of financial security.

The Miller Act payment bond covers subcontractors and suppliers of material who have direct contracts with the prime contractor. These are called first-tier claimants. The payment bond also covers subcontractors and material suppliers that have contracts with a subcontractor. These claimants are called second-tier claimants. Many states in the U.S. have adapted the Miller Act for use at the state level. These state statutes may be referred to as “Little Miller Acts.”

Miller Act Statute


§ 3131. Bonds of contractors of public buildings or works

(a) Definition In this subchapter, the term “contractor” means a person awarded a contract described in subsection (b).

(b) Type of bonds required Before any contract of more than $100,000 is awarded for the construction, alteration, or repair of any public building or public work of the Federal Government, a person must furnish to the Government the following bonds, which become binding when the contract is awarded:

(1) Performance bond A performance bond with a surety satisfactory to the officer awarding the contract, and in an amount the officer considers adequate, for the protection of the Government.

(2) Payment bond – A payment bond with a surety satisfactory to the officer for the protection of all persons supplying labor and material in carrying out the work provided for in the contract for the use of each person. The amount of the payment bond shall equal the total amount payable by the terms of the contract unless the officer awarding the contract determines, in a writing supported by specific findings, that a payment bond in that amount is impractical, in which case the contracting officer shall set the amount of the payment bond. The amount of the payment bond shall not be less than the amount of the performance bond.

(c) Coverage for taxes in performance bond.

(1) In general – Every performance bond required under this section specifically shall provide coverage for taxes the Government imposes which are collected, deducted, or withheld from wages the contractor pays in carrying out the contract with respect to which the bond is furnished.

(2) Notice – The Government shall give the surety on the bond written notice, with respect to any unpaid taxes attributable to any period, within 90 days after the date when the contractor files a return for the period, except that notice must be given no later than 180 days from the date when a return for the period was required to be filed under the Internal Revenue Code of 1986
(26 U.S.C. 1 et seq.).

(3) Civil action The Government may not bring a civil action on the bond for the taxes–

(A) unless notice is given as provided in this subsection; and

(B) more than one year after the day on which notice is given.

(d) Waiver of bonds for contracts performed in foreign countries A contracting officer may waive the requirement of a performance bond and payment bond for work under a contract that is to be performed in a foreign country if the officer finds that it is impracticable for the contractor to furnish the bonds.

(e) Authority to require additional bonds – This section does not limit the authority of a contracting officer to require a performance bond or other security in addition to those, or in cases other than those specified in subsection (b).

§ 3132. Alternatives to payment bonds provided by Federal Acquisition Regulation

(a) In general – The Federal Acquisition Regulation shall provide alternatives to payment bonds as payment protections for suppliers of labor and materials under contracts referred to in section 3131(a) of this title that are more than $35,000 and not more than $150,000.

(b) Responsibilities of contracting officer – The contracting officer for a contract shall–

(1) select, from among the payment protections provided for in the Federal Acquisition Regulation pursuant to subsection (a), one or more payment protections which the offeror awarded the contract is to submit to the Federal Government for the protection of suppliers of labor and materials for the contract; and

(2) specify in the solicitation of offers for the contract the payment protections selected.

§ 3133. Rights of persons furnishing labor or material

(a) Right of person furnishing labor or material to copy of bond – The department secretary or agency head of the contracting agency shall furnish a certified copy of a payment bond and the contract for which it was given to any person applying for a copy who submits an affidavit that the person has supplied labor or material for work described in the contract and payment for the work has not been made or that the person is being sued on the bond. The copy is prima facie evidence of the contents, execution, and delivery of the original. Applicants shall pay any fees the department secretary or agency head of the contracting agency fixes to cover the cost of preparing the certified copy.

(b) Right to bring a civil action

(1) In general – Every person that has furnished labor or material in carrying out work provided for in a contract for which a payment bond is furnished under section 3131 of this title and that has not been paid in full within 90 days after the day on which the person did or performed the last of the labor or furnished or supplied the material for which the claim is made may bring a civil action on the payment bond for the amount unpaid at the time the civil action is brought and may prosecute the action to final execution and judgment for the amount due.

(2) Person having direct contractual relationship with a subcontractor – A person having a direct contractual relationship with a subcontractor but no contractual relationship, express or implied, with the contractor furnishing the payment bond may bring a civil action on the payment bond on giving written notice to the contractor within 90 days from the date on which the person did or performed the last of the labor or furnished or supplied the last of the material for which the claim is made. The action must state with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed. The notice shall be served–

(A) by any means that provides written, third-party verification of delivery to the contractor at any place the contractor maintains an office or conducts business or at the contractor’s residence; or

(B) in any manner in which the United States marshal of the district in which the public improvement is situated by law may serve summons.

(3) Venue –A civil action brought under this subsection must be brought–

(A) in the name of the United States for the use of the person bringing the action; and

(B) in the United States District Court for any district in which the contract was to be performed and executed, regardless of the amount in controversy.

(4) Period in which action must be brought – An action brought under this subsection must be brought no later than one year after the day on which the last of the labor was performed or material was supplied by the person bringing the action.

(5) Liability of Federal Government – The Government is not liable for the payment of any costs or expenses of any civil action brought under this subsection.

(c) Waiver of right to civil action – A waiver of the right to bring a civil action on a payment bond required under this subchapter is void unless the waiver is–

(1) in writing;

(2) signed by the person whose right is waived; and

(3) executed after the person whose right is waived has furnished labor or material for use in the performance of the contract.

§ 3134. Waivers for certain contracts

(a) Military – The Secretary of the Army, the Secretary of the Navy, the Secretary of the Air Force, or the Secretary of Transportation may waive this subchapter with respect to cost-plus-a-fixed fee and other cost-type contracts for the construction, alteration, or repair of any public building or public work of the Federal Government and with respect to contracts for manufacturing, producing, furnishing, constructing, altering, repairing, processing, or assembling vessels, aircraft, munitions, materiel, or supplies for the Army, Navy, Air Force, or Coast Guard, respectively, regardless of the terms of the contracts as to payment or title.

(b) Transportation –The Secretary of Transportation may waive this subchapter with respect to contracts for the construction, alteration, or repair of vessels when the contract is made under sections 1535 and 1536 of title 31, or subtitle V of title 46, or the Merchant Ship Sales Act of 1946 (50 App. U.S.C. 1735 et seq.), regardless of the terms of the contracts as to payment or title.

Federal Acquisition Regulation


48 CFR 28.102 Performance and Payment Bonds and Alternative Payment Protections for Construction Contracts.

28.102–1 General.

(a) The Miller Act (40 U.S.C. 3131 et seq.) requires performance and payment bonds for any construction contract exceeding $150,000, except that this requirement may be waived (1) by the contracting officer for as much of the work as is to be performed in a foreign country upon finding that it is impracticable for the contractor to furnish such bond, or (2) as otherwise authorized by the Miller Act or other law.


(b)(1) Pursuant to 40 U.S.C. 3132, for construction contracts greater than $30,000, but not greater than $150,000, the contracting officer shall select two or more of the following payment protections, giving particular consideration to inclusion of an irrevocable letter of credit as one of the selected alternatives:


(i) A payment bond.


(ii) An irrevocable letter of credit (ILC).


(iii) A tripartite escrow agreement. The prime contractor establishes an escrow account in a federally insured financial institution and enters into a tripartite escrow agreement with the financial institution, as escrow agent, and all of the suppliers of labor and material. The escrow agreement shall establish the terms of payment under the contract and of resolution of disputes among the parties. The Government makes payments to the contractor’s escrow account, and the escrow agent distributes the payments in accordance with the agreement, or triggers the disputes resolution procedures if required.


(iv) Certificates of deposit. The contractor deposits certificates of deposit from a federally insured financial institution with the contracting officer, in an acceptable form, executable by the contracting officer.


(v) A deposit of the types of security listed in 28.204–1 and 28.204–2.


(2) The contractor shall submit to the Government one of the payment protections selected by the contracting officer.


(c) The contractor shall furnish all bonds or alternative payment protection, including any necessary reinsurance agreements, before receiving a notice to proceed with the work or being allowed to start work.
28.102–2 Amount required.

(a) Definition. As used in this subsection–


Original contract price means the award price of the contract; or, for requirements contracts, the price payable for the estimated total quantity; or, for indefinite-quantity contracts, the price payable for the specified minimum quantity. Original contract price does not include the price of any options, except those options exercised at the time of contract award.


(b) Contracts exceeding $150,000 (Miller Act).


(1) Performance bonds. Unless the contracting officer determines that a lesser amount is adequate for the protection of the Government, the penal amount of performance bonds must equal–


(i) 100 percent of the original contract price; and


(ii) If the contract price increases, an additional amount equal to 100 percent of the increase.


(2) Payment bonds.


(i) Unless the contracting officer makes a written determination supported by specific findings that a payment bond in this amount is impractical, the amount of the payment bond must equal–


(A) 100 percent of the original contract price; and


(B) If the contract price increases, an additional amount equal to 100 percent of the increase.


(ii) The amount of the payment bond must be no less than the amount of the performance bond.


(c) Contracts exceeding $30,000 but not exceeding $150,000. Unless the contracting officer determines that a lesser amount is adequate for the protection of the Government, the penal amount of the payment bond or the amount of alternative payment protection must equal–


(1) 100 percent of the original contract price; and


(2) If the contract price increases, an additional amount equal to 100 percent of the increase.


(d) Securing additional payment protection. If the contract price increases, the Government must secure any needed additional protection by directing the contractor to–


(1) Increase the penal sum of the existing bond;


(2) Obtain an additional bond; or


(3) Furnish additional alternative payment protection.


(e) Reducing amounts. The contracting officer may reduce the amount of security to support a bond, subject to the conditions of 28.203–5(c) or 28.204(b).
28.102–3 Contract Clauses.

(a) Insert a clause substantially the same as the clause at 52.228–15, Performance and Payment Bonds–Construction, in solicitations and contracts for construction that contain a requirement for performance and payment bonds if the resultant contract is expected to exceed $150,000. The contracting officer may revise paragraphs (b)(1) and/or (b)(2) of the clause to establish a lower percentage in accordance with 28.102–2(b). If the provision at 52.228–1 is not included in the solicitation, the contracting officer must set a period of time for return of executed bonds.


(b) Insert the clause at 52.228–13, Alternative Payment Protections, in solicitations and contracts for construction, when the estimated or actual value exceeds $30,000 but does not exceed $150,000. Complete the clause by specifying the payment protections selected (see 28.102–1(b)(1)) and the deadline for submission. The contracting officer may revise paragraph (b) of the clause to establish a lower percentage in accordance with 28.102–2(c).

[1] The National Defense Authorization Act for Fiscal Year 2005 established a requirement that all federal acquisition thresholds be reviewed every five years for inflation. The threshold for bond requirements under the Miller Act was increased to $150,000 as a result of this law.

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Contractors & Subcontractors Basics of Surety Bonds

Surety bonds have been a valuable tool for centuries. While suretyship has a long history, it wasn’t until the 19th century that corporate surety bonds were used.

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Study Guide

What Are Surety Bonds?

Contract surety bonds provide assurance to the project owner that a contractor is capable of completing a project according to contract specifications.

Suretyship is a loss-avoidance mechanism to prequalify contracting firms based on their credit strength, experience, and capability to successfully complete contracts. The economic risk of contractor default stays with the bonded contractor, who must sign an indemnity agreement holding the surety harmless. When it issues a surety bond, the surety company has prequalified the contractor and offers assurance to a project owner that the contractor is capable of performing the contract according to its terms and conditions. Furthermore, the surety company guarantees that the contractor will pay certain laborers, subcontractors, and suppliers associated with the project.

How Does a Surety Bond Work?

Contract surety bonds are three-party agreements whereby one party (the surety company) guarantees another party (the owner) that a third party (the contractor) will perform the contract. The owner specifies the bond requirement in the contract documents. It is the contractor’s responsibility to secure the bonds.

Because of the intricacy of the bonding process, and the fact that each surety company has its own unique underwriting standards and practices, contractors turn to surety bond producers to secure the surety bond on their behalf. The contractor includes the cost of the bond premium in his/her bid price. The surety company typically charges only for the final bond(s) when the contractor is awarded the contract.

Bonds are required on most public work projects. Most public works contracts are awarded under a competitive, sealed, open competition bidding system where the work is awarded to the lowest responsive bidder.

To protect tax-payer dollars from irresponsible bidders and incapable contractors, Congress passed the Heard Act in 1894, which required contractors to obtain surety bonds on public work. The Heard Act was later replaced by the Miller Act of 1935, which mandates performance and payment bonds on all federal public work contracts in excess of $100,000. Most state and local governments have adopted similar legislation (often referred to as "Little Miller Acts"). The requirements stipulated by "Little Miller Acts" vary by state.

Types of Contract Surety Bonds

The bid bond provides financial assurance that the contractor is capable of performing the contract at the price bid, and will comply with the conditions of the bid, including entering into a final contract if the successful bidder. It also assures the owner that the surety company will issue the requisite payment and performance bonds. If the contractor is awarded the contract but fails to enter into the agreement, the surety may be required to pay the difference between the awarded bid and the next lowest bid or pay the bond penalty.

The performance bond protects the owner from financial loss should the contractor fail to meet the terms and conditions of the contract. If the contractor defaults, the surety will respond in accordance with the terms of the bond.

A payment bond guarantees that the contractor will pay certain laborers, materials suppliers, and subcontractors. Payment bonds issued by themselves only guarantee that the project will remain lien free for the obligations assumed by the principal. If the contractor fails to pay amounts properly due, the surety will make the payments up to the penal amount of the bond (stipulated in the contract). Generally, payment bonds are supplied at no additional cost when purchased in conjunction with a performance bond.

Benefits of a Bond

  • Greater pool of qualified contractors bidding for jobs, resulting in greater likelihood of timely project completion and less likelihood of contractor failure;
  • Payment protection for subcontractors, suppliers, and laborers (Subcontractors and suppliers may submit more competitive prices if they know they’re protected by a payment bond);
  • Technical, management, and/or financial assistance for the contractor to keep project on schedule;
  • No liens from unpaid subs and suppliers covered by the payment bond, which will smooth transition from construction to permanent financing; and
  • Guarantees correction of defects as a result of faulty material or workmanship for at least one year.

Contractors Must Qualify for Surety Bonds

The process of obtaining bonds is more like obtaining bank credit than purchasing other types of insurance. When obtaining bank credit, the financial institution will provide the loan only if it determines the party is capable of repaying it in full with interest. With traditional insurance, premiums are paid based upon deductibles and expected losses. Surety companies, however, do not expect a loss. Sureties should not bond a contractor that does not meet their prequalification standards. The primary service of the surety is prequalification. Therefore, the surety bond premium is primarily a fee for service and granting of surety credit, although sureties may employ loss cost and severity studies.

The Prequalification Process

The surety company’s prequalification process (also referred to as underwriting) carefully analyzes the contractor’s entire business operation, because the surety is backing the promise of that contractor to perform the contract. The surety company evaluates the contractor’s capacity to perform this particular contract as well as other contracts already written, determines his/her financial strength, reviews his/her character, and may ask for personal or corporate indemnity. The surety bond producer’s role is to assist the contractor with the prequalification, as described in “Surety Bond Producer” later in this guide.

Capacity to Perform – typically includes analysis of:

  • Resumes of the contractor and key personnel;
  • Contractor’s track record of successfully completed wokk;
  • Adequacy of the contractor’s equipment and tools required to perform the contract;
  • Rationale for why the contractor is undertaking the project;
  • Continuity plan that illustrates how the company will continue performing its obligations in the event of the demise or departure of key personnel; and
  • Contractor’s future plans, short and long-term goals, objectives, and growth strategies.

Financial Strength – typically includes analysis of:

  • Detailed financial statements for the past 3-5 years. Accounting methods should comply with Generally Accepted Accounting Principles (GAAP). Financial statements should include: Balance Sheet, Statement of Earnings, Statement of Changes in Owner’s Equity, Statement of Cash Flow, Notes to Financial Statements, and Contract Schedules. The surety may ask for interim financial statements. Requirements for interim statements vary, but a six-month statement usually is the minimum.
  • Contract schedules that typically include a summary of completed contracts and contracts in progress. Sureties also will require a schedule of work in progress (usually quarterly). This schedule should list each job by name and indicate the total contract price including: change orders, amount billed to date, cost incurred to date, revised estimate of the cost to complete, estimated gross profit, and the anticipated completion date;
  • Cost records that account for the financial status of the contractor’s jobs;
  • Credit reports demonstrating how the contractor handles payment of debts; and
  • A bank line of credit showing unsecured credit that can be used as short-term working capital.

Character – Surety companies may review trade references from owners, architects, subcontractors, general contractors, material suppliers, etc., with whom the firm has worked to get a sense of the contractor’s reputation for fair, businesslike dealings.

Indemnity Agreement – Surety companies may require the personal indemnity of the owners, their spouses, or major stockholder(s) of the construction firm to assure that they are going to put forth their best efforts to meet contract obligations. In some cases, personal assets can increase surety credit available to the construction firm. For a proper evaluation of what loss paying power the personal indemnity does provide, the surety may request the contractor to provide personal financial statements.

Contractor Default

Although the prequalification process greatly reduces the likelihood of contractor default, a host of problems can befall a construction project, which may cause the contractor to fail. Contractor failure may be brought on by any of these events or a combination thereof:

Accounting & Financial Management Problems

  • Inadequate cost and project management systems
  • Estimating or procurement problems
  • Poor bidding
  • Cost Overruns
  • Lack of adequate insurance
  • Improper accounting practices (not adhering to the American Institute of Certified Public Accountants Audit Guide for Construction Contractors)

Changes in Ownership and/or Key Personnel

  • Leadership and focus of company changes (contractor retires, dies, sells company, etc.)
  • No ownership or management transition plan exists to ensure continuity in the event of death or disability.
  • Key staff leave company. Inadequate time to train new staff and bring them up to speed on company policy and operations, thus leaving projects ill-managed.

Changes in Strategic Direction

  • Change in type of work performed by contractor
  • Changes in the location of the work performed
  • Significant increases in the size of individual projects
  • Rapid expansion

Uncontrollable Factors

  • Economic down-turn and high inflation
  • Weather delays
  • Poor site conditions and/or building plans
  • Labor difficulties (lack of skilled labor)
  • Failure of subcontractors or suppliers
  • Material and equipment shortages
  • Lack of or delay in payments by project owner
  • Unreasonable project owner

Although these events are not always foreseeable at the time a bond is issued, there are warning signs that a contractor is in trouble.

Ineffective Financial Management System

  • Inability to forecast cash flow
  • Receivables turning over too slowly
  • Vendors demanding cash on delivery for supplies and materials
  • Past due bills

Bank Lines of Credit Constantly Borrowed to their Limits

  • All credit fully secured
  • Credit lines not being renewed

Poor Estimating and/or Job Cost Reporting

  • Erratic bid spreads
  • Profit margins are thin or not realized
  • Profit fade

Poor Project Management

  • Inadequate supervision
  • Inability to administer and collect change orders
  • Project(s) not completed on time
  • One or more contracts with a claim
  • Company frequently involved in litigation

No Comprehensive Business Plan

  • Contingency plans not developed
  • Company has no "road map," goals, or objectives

Continual Downward Spiral

  • Revenue and margins decrease over time
  • Continued operating losses
  • Loss or reduction of bonding capacity

Communication Problems

  • Disputes between contractor and owner
  • Poor communication between field and management

Loss of Loyal Customers

  • Decreasing reputation in the industry

Claims Handling

When a contractor gets into trouble, the surety may look at several options to avoid further deterioration of the situation and an ultimate default. Default may be averted because of the surety company’s expertise in seeing projects to completion. To avoid default the surety company may:

  • Provide trained personnel;
  • Provide direct payment to subs, laborers, and suppliers; and/or
  • Offer financial assistance to contractor.

While everyone would prefer to avoid default, it is not always possible–especially if the contractor or owner fail to talk about problems as they arise. In the event of default the surety company may, according to the particular language of the bond and construction contract:

  • Retain the original contractor and:
    • Provide trained personnel,
    • Offer financial assistance, and/or
    • Provide payment for subs and suppliers;
  • Tender a new contractor for completion;
  • Take over the project; or
  • Pay the penal amount of the bond.

Cost of Surety Bonds

The cost of the surety bond is referred to as the premium. The premium is a fee for the surety’s prequalification, underwriting, and other services. Bonds typically cost 0.5% to 1% of the contract price, although rates vary from company to company. A payment bond generally is provided at no additional cost when issued in conjunction with a performance bond.

In charging this small fee for prequalification, the surety underwrites the contractor with the assumption that it will not incur a loss under the bond.

Examples of the Cost of Surety Bonds

Project Amount Sample Bond Premium Percent of Contract Amount
$1 million $7,700-$13,500 .77% to 1.35%
$5 million $33,200-$47,250 .66% to .95%
$10 million $56,950-$81,000 .57% to .81%
$20 million $101,950-$146,000 .51% to .75%
Premiums are approximate, based on premiums from two of the nation’s top 10 sureties. NOTE: Some surety rates may be higher or lower than this example as rates vary from company to company.

It is important to inquire about the rates when you are charged a premium. Rates may vary depending on the type of work the contractor normally performs. When evaluating the premium, contractors should take into account the opportunities and services that the surety company offers, such as customer service, support, confidence, claims handling, and helping the contractor grow.

Most surety companies file their individual rate plans with the various insurance departments of the states in which they operate. Almost all surety companies file multiple rate plans along with prequalification requirements for each category. Most rate plans are financial requirements based on net worth, sales volume, and quality/frequency of financial reports.

Surety Bond Producer

The surety bond producer plays an essential role in helping a contractor obtain surety bonds. The surety bond producer is an integral part of the contractor’s external advisory group, which includes attorneys, bank officers, and auditors. Surety bond producers, however, receive a commission on the bond premium only when the contractor is awarded the job and the bonds are issued.

By using his/her specialized knowledge of the construction industry, the surety bond producer prepares the contractor for the surety company’s rigorous prequalification process. The producer should:

  • Match the needs and strengths of the contractor to the surety that will support him/her. To do that, the producer must understand the dynamics that will affect the surety’s willingness to support the contractor and his/her business, then use that understanding to create and nurture a successful relationship between the contractor and the surety company.
  • Offer sound business advice, formalized management consulting services, and technical expertise or introduce them to appropriate professionals or consultants. The producer may assist with developing a strategic/business plan, or introduce the contractor to bankers, CPAs, or attorneys to assist the contractor.
  • Compile financial documents for submission to the surety company. In some cases, the producer may analyze the contractor’s financial statements to determine the contractor’s working capital, net worth, and current revenue recognition based on percent-project- completion before submitting it to the surety company.
  • Develop written statements explaining net losses in a fiscal year, adjustments to retained earnings, and footnotes that may affect surety credit.
  • Review contractor’s contracts to help him/her avoid taking on excessive risk.
  • Conduct background investigation of the contractor’s past contractual obligations.
  • Recommend a responsible line of credit consistent with the contractor’s capabilities.
  • Tailor the contractor’s submission for the specific needs and particular requirements of the surety company and guide the contractor through a formal presentation to the surety company.
  • Maintain communication channels between contractor and surety company with periodic reports on work progress, financial performance, and business plans.
  • Maintain communication with contractor through site visits, social gatherings , industry meetings, or visits to contractor’s office.
  • Assist and advise the contractor on how to obtain or increase surety credit. A qualified surety bond producer can offer a candid appraisal of what the contractor can do to meet the surety company’s underwriting standards.

Choosing a Surety Producer

Contractors should look for a producer that specializes in bonding for the construction industry. A surety bond producer should have the following qualities:

  • A reputation for integrity and respect in the industry;
  • Personal interest in the contractor’s success;
  • Ability to build solid relationships with surety underwriters;
  • An understanding of the construction industry and the construction management process, including estimating, bidding, building and cost control systems, and an understanding of basic credit principles;
  • Knowledge of accounting and finance, especially construction accounting procedures, ability to analyze financial statements, work-in-progress, and cash flow.
  • Knowledge of construction, subcontracts, and contract law;
  • Authority to issue bonds on the surety’s behalf (within limits);
  • Awareness of local, regional, and national construction markets;
  • Experience in strategic planning and management practices to promote successful contracting; and
  • The best surety bond producers are a part of the construction community through active involvement in and support of local and national construction and surety industry associations, such as the National Association of Surety Bond Producers (NASBP), Associated General Contractors (AGC), Associated Builders and Contractors (ABC).

Many surety bond producers also handle other lines of insurance applicable to managing construction operations, such as Builders’ Risk Insurance, Mobile Equipment Insurance, Commercial General Liability, Personal Liability, Workers’ Compensation, Insurance for Building and Contents, and Crime Coverage.

Surety Company

The Role of the Surety Underwriter

The surety underwriter is an employee of the surety company. The underwriter reviews the contractor’s case by thoroughly analyzing the financial records and the contract to determine the contractor’s ability to complete the project. The underwriter ensures that bond forms; application forms; forms for indemnity, subordination, collateral; and other agreements are completed and filed appropriately.

Choosing a Surety Company

As a contractor develops a strong business relationship with a surety bond producer, a relationship will also ensue between the contractor and the surety company. The surety company will help the contractor keep and increase its surety capacity. The surety industry is a people industry-it’s about building and maintaining relationships. When choosing a surety company look for:

  • surety’s reputation in the marketplace;
  • surety’s experience with your type of work;
  • easy and reliable access to representatives;
  • open communication and prompt feedback;
  • good relationships with producers; and
  • effective claims handling.
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Training New Surety Professionals

Basics of Surety Bonds

Surety bonds have been a valuable tool for centuries. While suretyship has a long history, it wasn’t until the 19th century that corporate surety bonds were used. Discover the basic principals of contract surety and learn how surety bonds can ensure the completion of a project by selecting a topic below.
10 Things You Should Know About Surety Bonding
The Importance of Surety Bonds in Construction
When You Build… Bond

How to Obtain Surety Bonds

Federal, state, and local governments require surety bonds in order to manage risk on construction projects and protect taxpayer dollars. However, surety bonds are not limited to public construction. Many private project owners and lenders require bonding on their projects and prime contractors may require subcontractors to obtain bonds.

In today’s competitive construction environment, a contractor’s ability to obtain surety bonds has a significant effect on that contractor’s ability to acquire work.

Learn more about obtaining a surety bond by selecting a topic below.
How to Obtain Surety Bonds
SBA’s Surety Bond Program
Your First Bond
Helping Contractors Grow: Surety Bonding for New & Emerging Contractors

Qualifying a Surety Company

It is important to know whom you are dealing with when applying for surety bonds. Most large property and casualty insurance companies have surety departments. In addition, there are some insurance companies for which surety bonds make up all or most of their business.

Before accepting a surety bond, it is important to verify that it is from a licensed and reputable surety company.

Learn how easy it is to verify that the surety company is reputable and licensed to do business in your state by selecting the topic below.
Surety Companies: What They Are & How to Find Out About Them
The Surety & Fidelity Association of America (SFAA)
National Association of Surety Bond Producers (NASBP)

Comparison to Other Risk Management Products

When it comes to limiting exposure to the inherent risks of construction, there is no substitute for time-tested contract surety bonds. While proponents of bank letters of credit claim they provide adequate protection, they fall short of the protection and services of a surety bond.

Learn the differences between surety bonds and bank letters of credit by selecting a topic below.
Surety Bonds Vs. Bank Letters of Credit
Our Letters Are Not Their Bonds(RMA Journal, February 2006)
Subcontractor Default Insurance

Claims Process

In the unfortunate event of contractor failure on a bonded project, it is important to understand the claims process, the participants, and the complexities of a surety bond claim.

Learn about surety bond claims by selecting the topic below.
A Construction Project Owners’s Guide to Surety Bond Claims

Protecting Taxpayer Dollars

In 1894, Congress passed The Heard Act, which was supplanted by the Miller Act in 1935. Since then, the federal government has required that contractors obtain surety bonds for public works, and virtually all the states have followed with their own statutes, called “Little Miller Acts.”

Learn how surety bonds protect public construction projects by selecting a topic below.
The Surety Safeguard: How Bonding Protects Taxpayer Dollars
Why Bid Performance & Payment Bonds Are Required for Public Construction Projects
Public Flash Presentation

Contractor Failure

Construction is a complicated business that faces ever-challenging conditions, and those who are not prepared or capable of meeting these demands may ultimately fail. Thousands of contractors, whether they have been in business for two years or 20, fail each year, leaving behind unfinished private and public construction projects with billions of dollars in losses to project owners.

Learn about the warning signs and events that can lead to contractor failure by selecting a topic below.
Why Do Contractors Fail?

Managing Risk

For years, surety bonds have been mandated by law for federal public construction projects under the Miller Act of 1935. Many state and local governments also require surety bonds on their public construction projects with “Little Miller Acts.” Surety bonds also are used for many private projects as well. Moreover, an increasing number of construction lenders are now recognizing the wisdom of requiring contract surety bonds to protect loans secured by private sector projects.

Information about the benefits of surety bonding for private owners and bankers may be found here.

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Marketing & Public Relations

Web Site Development

A well-designed Web site is a powerful tool for communicating ideas, sharing information, and promoting an organization. Yet developing and maintaining such a site can seem a daunting task. The jargon can be confusing, the options overwhelming.

Getting Started

The first step is to come up with a name for the Web site – referred to as a domain name or Web address. The name should be connected clearly to the LSA. Sites like Register.comNetwork SolutionsVerio,, and allow you to determine the availability of a domain name and will walk you through the registration process. Costs range from $19 to $40 a year.

Plan Your Site

Good planning is crucial to the site’s success. These are some of the steps to include in the planning process.

  1. Seek assistance of those within your organization who have Web experience. If you have the funds, consider contracting a professional Web designer to help with the initial set-up of the site.
  2. Outline the development process. How will decisions get made? Who will have input? Whether you have one person or a team guiding the project, make sure the process is clear.
  3. Develop a budget for the site. Registration, hosting, and consultant fees are just a few of the expenses associated with Web site development. Final costs will vary but it is wise to consider and keep track of them at the start of the planning process.
  4. Conceptualize the design and content. Effective Web sites are tools; they fulfill an integral role in an organization’s communication and outreach activities.

Contract With a Web Server Company to Host Your Site

To be accessible on the Web, the site needs to reside on a server with a high-speed connection to the Internet. Most organizations pay a monthly fee to rent space on the servers of a Web hosting company. Hosting companies offer an array of plans, including various configurations of essential services along with lots of bells and whistles.

You may be limited to the number of pages or amount of memory you can use on the server. Consider the services you really need. If you are going to manage the Web site yourself, you will want the host to provide an FTP (file transfer protocol) site so you can easily update and manage it. Most organizations can meet their needs with a hosting package under $30 a month (there may also be a setup fee, which should be under $50). Your Web site developer may be able to suggest a trusted hosting server.

Manage the Site

Maintaining the Web site is just as important as building it in the first place. New information will always be waiting to be uploaded, old information will need to be updated, and users will provide suggestions that need to be incorporated. Make a commitment to keeping the Web site up-to-date.

Whether you pay a developer to maintain the site or it is maintained in-house, it is important to quality control the site. It is a big mistake to put up a Web site and never use it. You are trying to communicate through the Web site, so make sure it’s saying what you want it to say. Here are some tips to making sure the Web site is fresh, functional, and fulfilling:

  • View the Web page with different browsers, e.g. Microsoft Internet Explorer and Netscape Navigator. These are the two most common browsers and cover most Web users. Each browser outputs the code differently. Sometimes a Web site looks great in one version but not another. The Web developer should fix any of those problems.
  • Whenever additions or changes to the Web site are made, test it thoroughly and proof it carefully to make sure there are no errors.
  • Check every link on the Web site at least once a month. Often, pages get moved, links are broken, and outside Web sites change domains. Make sure the links are sending visitors to intended pages.
  • If the Web site is used to provide information, make additions to the Web site as soon as there is new material. If visitors see new information on a regular basis, they will come back to see what is new.


Getting a site on the Web is an achievement, but it doesn’t count for much if no one sees the site. Bring traffic to the site by marketing it to your key audiences.

  • Contact other organizations that have Web sites and see if they will link the site to theirs.
  • Place the Web address on any material your organization develops.
  • Solicit feedback from Web visitors to improve the site and make it more effective.

– Adapted from Building an Effective Web Site: A Guide for Nonprofit Organizations by Adam Shannon, Oxygen Communications.

The Nuts & Bolts of Web Site Design

Plans for developing the LSA Web site are progressing nicely. Targeted audiences have been identified and a list of documents to post has been created. The domain name is registered and a server to host the site has been determined. A marketing plan and a plan for updating the site when new material is available also have been developed.

Now it is time to actually create the site—to get to the nuts and bolts of designing a Web site. Not too long ago, creating a Web site meant one thing—writing code in Hypertext Markup Language or HTML. Now there are many ways to create a Web page. These are some options to consider.


Hypertext Markup Language is the common language of the Internet. All pages on the Internet are based on it. This system uses programming codes like around text or an image to instruct a Web browser (such as Internet Explorer or Netscape Navigator) how to format a document.

The advantage of HTML is it requires no expensive software programs. Simply type the code into a word processing program like Microsoft Word, save it as an HTML document, and then open it through the Web browser. The disadvantage is learning to write HTML code can be a long, steep learning curve, particularly when developing a more sophisticated presentation.

Fortunately, there are a number of sites that can help. For the serious student, Webmonkey offers an excellent set of free online tutorials and resources for the beginning Web author. Other worthwhile sites are, the Web Design Workgroup, and HTML Goodies.

HTML is for those who have a tight budget, plenty of time, a basic Web design in mind, and a knack for learning technical computer coding. If not, consider some of the other options.

Online Web Design

Another option for developing the site is using an online program that provides templates that can be customized. Offerings differ from provider to provider, but generally, these sites advertise simple “point and click” designing, professionally designed templates, one stop shopping for domain names and hosting, and technical support.

Some examples are Tripod.comYahoo’s GeoCities, and Network Solutions. Costs range from $5 to $30 a month. Be aware that the lower range limits the possibilities (i.e. only 5 Web pages for the site).

Developing a Web site with an online program can be as simple as writing e-mail. It can also be very restricting in terms of what, how much, and the design of the pages. However, these online programs might just right for those who are not technically inclined, have little time and a bit more money, and are looking for a very basic Web site.

What You See Is What You Get

Software that enables Web site creation without needing to learn HTML code is called a WYSIWYG (pronounced wizzy-wig) program. The name is an acronym for “what you see is what you get” because unlike a text editor such as Notepad, these programs display text and images pretty much as the Web browser will present them. WYSIWYG programs allow users to drag and drop images and text onto a blank canvas while it quietly composes the HTML code underneath.

DreamweaverFrontpage, and Print Shop® Deluxe are among the better-known WYSIWYG programs on the market now. Ranging in cost from $50 to $300, the programs include tutorials, templates, and loads of clip art allowing beginning and intermediate users to simply and quickly create relatively sophisticated site.

Those with a budget and a short timeline should consider a WYSIWYG program for designing their Web site. Spend some time reviewing the offerings before buying. It will be time well spent. Also make sure the Web server can support everything the site needs to do.

Promoting Contract Surety: How SIO Can Help

The most time-consuming component of any marketing strategy is developing the message and the materials. SIO offers a wealth of resources to help LSAs reach a variety of targeted audiences and can provide assistance with private construction project owner outreach, writing articles, developing presentations, or increasing the LSA’s exposure at exhibitions and trade shows.

SIO provides information and resources for specific targeted audiences:

Here are ways SIO is prepared to assist LSAs:

PowerPoint® Presentations – In today’s business world, PowerPoint® is the preferred visual aid. SIO offers PowerPoint® presentations with speaking notes that can be downloaded from its Web site. Be sure to distribute to attendees.

Article Placement – By maintaining relationships with several editors or various publications whose audience needs to know about contract surety bonds, SIO continues to place articles that educate readers on the value and importance of surety bonds in construction. SIO writes articles for Construction Executive, Engineering News-Record (ENR), and many other publications. SIO also uses its contacts to place articles written by NASBP and SFAA members. For help with an article, contact SIO.

Prestigious Awards Program – If an LSA hasn’t won an SIO Award for Excellence in Surety Bond Promotion, associations either aren’t actively promoting surety bonds or members aren’t being recognized for their efforts. SIO presents these awards to recognize LSAs, NASBP members, and SFAA members who have taken special initiatives to promote contract surety bonds. SIO’s prestigious Tiger Trust recognizes NASBP and SFAA members who have persuaded a private construction owner or lender to require surety bonds on a project.

Electronic Newsletters – The LSA Communiqué provides LSA officers and members with resources and ideas for promoting contract surety bonds and recognizes NASBP, SFAA, and LSA members who promote surety bonds. To see what other surety professionals are doing and to learn strategies and tips on promoting surety bonds, subscribe to the LSA Communiqué. The Surety Bond Networker keeps surety professionals abreast of industry trends and information, as well as SIO activities and news. Stay connected to the industry’s leading surety professionals. Subscribe to the Surety Bond Networker.

Speakers’ Bureau – Need a speaker? Like to speak? Call SIO at (202) 686-7463 or submit an online speaker request form. When someone needs a speaker, SIO turns to the SIO Speakers’ Bureau to offer potential candidates. The speakers’ bureau contains a list of NASBP and SFAA members willing to accept speaking engagements. SIO can arrange for surety professionals to address a variety of topics such as:

  • How to obtain surety bonds;
  • Why contractors fail;
  • Basics of bonding;
  • State of the surety industry;
  • Surety bonds for public works;
  • Protecting construction lending capital; and
  • Surety bonds for private projects.


Conferences and trade shows offer unique opportunities to meet with targeted audiences and promote contract surety bonds. SIO and SFAA take their exhibits to several expos and trade shows every year and may call on LSAs to assist with booth staffing. LSAs may borrow SFAA’s exhibit booth by calling (202) 463-0600. In addition, LSA’s may check-out SIO’s
exhibit posters and order handout materials by calling (202) 686-7463.

Promoting Surety in a Crowd

  1. Pick the Crowd – Who is the targeted audience? What issues need to be addressed? Contractors and public owners may be the obvious choices, but bankers, private owners, real estate developers, design professionals, and other construction industry advisers need to hear about the value and benefits of contract surety bonds.
  2. Prepare Materials – Prepare materials to reflect the specific benefits surety bonds have for the targeted audience. For example, a convention of private owners could be swayed with case studies illustrating the need for surety bonds, while a meeting of emerging contactors may be more interested in how to obtain surety bonds. SIO offers CDs that address specific needs of public owners, private owners, contractors, and students.
  3. Send Out the Alert – Let attendees know ahead of time that you will be exhibiting at an event. Don’t rely solely on the marketing efforts of the meeting managers. Offer to provide a short, engaging article to the group or association holding the event. Provide a news release to trade publications or a business journal about contract surety bonds and mention the exhibit to create pre-show interest. Send a direct mail letter or postcard to event registrants offering an incentive for visiting your booth. Become an event sponsor to heighten your exposure.
  4. Collect the Data – Obtain information from exhibit visitors interested in surety bonds and offer to send literature after the show. Prepare beforehand what information you want to collect and from whom.
  5. Follow Through – Once the event is over, the work is just beginning. If you prepared follow-up material ahead of time, the time between parting handshake and next contact will be short. The sooner the contact hears back from you, the better. Send a personalized letter addressing the contact’s individual needs, questions, or concerns. Prepare a general letter prior to the event, but take the time to personalize the letter with information specific to your conversation with the individual.
  6. Make a Splash at a Conference – Take advantage of question-and-answer periods by stating your name, employer, and a brief job description. Attendees will be more apt to approach you afterward if you introduce yourself to the group. Look for opportunities to visit with conferees such as in an elevator, at the registration desk, or waiting for a taxi or valet. Arrive with brochures, giveaways, or fact sheets and distribute them to everyone you meet.

SIO’s List of Speaker Topics

For a list of recognized experts on a topic, organizations that can assist with locating a speaker, or speakers SIO staff has heard speak, view SIO’s List of Speaker Topics. This is by no means a complete list of speakers on the topics listed. Some speakers may charge a fee and/or travel expenses.

SIO PowerPoint® Presentations

All SIO PowerPoint® presentations are downloadable from the SIO Web site.

Unleash the Power of PowerPoint®

These days, the word "presentation" is synonymous with "PowerPoint®." While this omnipresent tool can help create appealing presentations, its true power is sometimes ignored. PowerPoint® is a means to communicate visually with an audience. Take advantage of its power, not by including overwhelming amounts of information, but by using it to emphasize, clarify, and quickly convey your message.

Quality vs. Quantity

More is not always better. Reducing your messages to bite-sized chunks allows your audience to digest them more easily. After you have crafted the presentation, go back and conduct an audit. Examine each slide carefully and determine whether it’s truly necessary – combine and condense wherever you can.

Balancing Text and Graphics

No doubt you’ve seen the PowerPoint® presentation where the speaker seems to be reading verbatim from a printout of the slideshow. What was gained by hearing the slides read aloud? According to multi-media graphic designer Patty Civalleri in the September 2002 issue of Presentations magazine, “this presentation technique usually does more harm than good.” She adds that a large amount of text causes the audience to read line-by-line, diverting attention away from the speaker. Use text sparingly and emphasize key points to keep the audience focused on the message and you.

Replace words with graphics if you can. Images convey large amounts of information in a small amount of space. Images you include should complement your speaking points. A conflicting or seemingly random image creates confusion – don’t add graphics simply as filler.

The Look

Think of each slide as an ad for a point in a larger campaign you are communicating through the entire presentation. Would you be attracted to a full-page advertisement of black and white text? Create something that you find visually appealing while using words and images to engage and communicate.

When designing slides, keep in mind some basics about colors and legibility. Use a high contrast between the text and the background. Light, bright colors on a dark background are effective, and vice versa. Small-point fonts won’t convey your message – think big and bold. Also, keep in mind that what you see on your computer screen may not be what you get on the full screen. Always conduct a trial run with your projector on a full screen to ensure slides can be read easily.

Don’t Go Overboard

PowerPoint® offers a number of features to animate text and graphics, but a slideshow with words and images flying, dissolving, and popping out all over the screen can be distracting. When in doubt: keep it simple.

Remember, PowerPoint® is only a part of the overall presentation. Do not rely on PowerPoint® to give the presentation for you. Watching someone click a mouse and read slides is not an engaging experience. Use PowerPoint® for its maximum intended effect – as a visual aid to your oral presentation.

Speakers’ Bureau

How do you take the efforts of your local surety association members to the next level? Two words: speakers’ bureau. This next step in promoting contract surety bonds may be challenging to organize, but it also offers rich rewards.

First things first – what is a speakers’ bureau? At its basic level, it’s a list of well-spoken experts – but the power behind the list lies in the fact that you will have an audience’s undivided attention, and full control of the message. Editors can alter press releases, your voice can get lost in an exhibit hall – but a speaking engagement gives you complete control of the content and quality of your message.

The following list serves as a quick guide to help you develop a speakers’ bureau.

  1. Designate someone to be the speakers’ bureau coordinator. He or she will be in charge of maintaining the speakers’ bureau file and will serve as the key point of contact for those seeking a speaker.
  2. Identify the experts and issues. Assemble a listing, with contact information for each, of those who are knowledgeable in specific areas of surety. Next, prepare summaries (a bite-sized abstract will suffice) of the issues that your speakers are able to discuss.
  3. Create a speaker file. Put together a file for every speaker containing a biography, a photograph, and a brief but suitable introduction for them. This information is useful not only to promote speakers, but also comes in handy when groups want to announce a speaking engagement in their newsletters and meeting programs. “Creating a speakers’ bureau is all about having direct contact and communication.”
  4. Identify your audience. While your list of speakers and topics may cover everything from default insurance to warranty issues, not everyone will be interested in surety from A to Z. Identify the topics that are most pertinent to each group (e.g. bank letters of credit vs. surety bonds for bankers; contractor prequalification or claims handling for owners). Pool your group’s contacts throughout various industries to compile a comprehensive list – matching up a speaker, topic, and audience. Again, keeping this list (as with any media list) up-to-date is imperative.
  5. Promote! Once you’ve identified the best speakers for each group, it’s time to let the world know. Put your promotional skills to work using an assortment of tools to get the word out: a traditional press release; a direct mail post card; a one-on-one phone call; or a personalized letter.
  6. Try tailoring, as much as possible, each piece to the particular audience by including a listing of the topics most relevant to each. Also, reach out to local media or trade publications and alert them of the bureau – the extra exposure can only help.
  7. Utilize Feedback. After a speaking engagement, make sure your group gets a chance to debrief the speaker. Finding out what issues, questions, and concerns each group raises is important for adapting your messages in the future.

Creating a speakers’ bureau is all about having direct contact and communication. While it may take a good bit of coordination and time to organize a bureau, the chance to be able to share the industry’s perspective on issues directly with other groups is invaluable.

Public Speaking Tips

Getting an Audience to Listen

Author Richard Dowis offers many useful public speaking tips in his book The Lost Art of the Great Speech: How to Write It, How to Deliver It.

  • View an invitation to speak as an opportunity, not a summons that appeals to you about as much as an IRS audit.
  • Compose a statement of purpose as a starting point to your writing. Your purpose can be to entertain, inform, inspire, advocate, motivate, educate, persuade, and yes, even to SELL!
  • Audiences are primed to listen at the beginning so craft an opener that will establish rapport, set the tone, enforce your authority to speak on the topic, and arouse interest.
  • Write your speech as a conversation, not a lecture! Use plenty of pronouns: you, I, us, we. Engage your audience; be interactive.
  • Choose gut vs. brain words. Do you use verbs like postulate, fabricate, ascertain, surmise? If so, cut the brain words and use gut action verbs, such as, cry, jump, ooze, roar!
  • Everyone loves a story, anecdote, or joke, but only use ones that are true (or perceived to be true) because they offer insight about the topic, the speaker, or the event, and they’re interesting or amusing and easy to understand.
  • Only use visual aids if they enhance your message. Do not let them detract from your spoken message.

SOURCE: The Lost Art of the Great Speech: How to Write It, How to Deliver It by Richard Dowis, AMACOM, 1601 Broadway, New York, NY 10019, $14.95. Printed in Communications Briefings; 703/548-3800; Speak With Confidence and Power.

Presentation Power

When preparing to give a presentation, make sure you can answer YES to these questions:

  • Do I know the one thing I want the audience to remember? If the answer is no, your speech has no focus.
  • Do I know how much people can remember? Rule of thumb – if you give a five minute speech, your presentation should have only one main point.
  • Are my figures clear? Audiences are slow to receive and analyze data. Make charts and graphs simple, with key points emphasized. For complex information, prepare a handout, but try to limit it to one page.

SOURCE: Creating Confidence: How to Develop Your Personal Power and Presence by Meribeth Bunch, Kogan Page Ltd., London, England. Printed in Communications Briefings; 703/548-3800.

It’s Still the Words

Think about great speeches you’ve heard or read.

  • Martin Luther King Jr., "I have a dream."
  • Franklin Delano Roosevelt, "The only thing to fear is fear itself."
  • John F. Kennedy, "Ask not what your country can do for you, but what you can do for your country."
  • Abraham Lincoln, "We cannot dedicate – we cannot consecrate – we cannot hallow this ground."

Even in an electronic age, it’s still the words that live in our minds.

An unforgettable speech takes research, planning, and the right words. The first consideration in finding the right words and constructing an effective speech is know the audience! And know the type of speech appropriate for the audience. For example, remarks to busy executives should be challenging, quick, and engaging. Regardless of the type of address, waste no time in making a quick, clear, and simple connection with the audience. Find something in common with your listeners and lead with it.

SOURCE:"Speak Like the Best of Them," by Daniel Cirucci, Association Management, 1993.

Speak With Confidence and Power

Prepare, Relax, Be Positive: three suggestions from the editors of Communications Briefing, a Alexandria, Virginia based publication providing business communication advice.

Prepare – We’ve all heard public speaking tips about being prepared, such as "Know your audience;" "Do your homework;" "Practice, practice, practice" – and they’re good tips to follow, but some other important preparatory steps include practicing pronouncing difficult words and names, double-checking facts and figures, and cutting material that isn’t vital to the speech’s main message.

Relax – Take gradual steps to overcome stage fright and anxiety about public speaking. Practice a speech to an empty room, then deliver to smaller, safer audiences such as family members, co-workers, and close friends. When practicing, record your remarks on audiotape to listen for any grammatical errors or mispronunciations; then video tape your presentation to ensure you are not doing any annoying or distracting gestures or body movements. Lastly, determine what motivates and appeals to your audience. You’ll be able to match your message to their interests and they’ll be more responsive to you.

Be positive – Your attitude helps determine how well the audience will receive your message. Most audiences want you to succeed and to be yourself; sincerity and enthusiasm often prevail over a lack of public speaking experience. To calm your nerves, visualize yourself giving a successful speech. And remember, audiences are attending your presentation because they are interested in the topic.

SOURCE: How to Speak with Confidence and Power, Printed in Communications Briefings; 703/548-3800.

The Rewards of Public Speaking

"A good speech is the single most cost-effective marketing and public relations tool any organization can have," advises author Joan Detz in her book How to Write and Give a Speech. Giving an electrifying, informative, and entertaining speech is comparable to making 50 to 100 cold calls in one day. You may not make a sale today, but you may have sold yourself and your company/product to a future client – a member, or two, of the audience!

A must after every speech or sales presentation: get the audience’s business cards and follow-up with a letter and phone call.

SOURCE: "You, Too, Can Be a Successful Public Speaker" by William C. Wilson, Jr. – American Agent & Broker, December 1999.

Dispelling the Myths of Public Speaking

Myth Successful speakers have natural speaking voices.

Fact The best speakers are those who connect with an audience by being themselves and speaking conversationally. Speak as if you are conversing with each audience member, use eye contact, smile, and target your message to make a personal connection.

Myth Good speakers do not have a fear of speaking.

Fact Every speaker, experienced or inexperienced, feels anxiety before a presentation. Anxiety can be reduced through relaxation techniques, such as deep breathing.

Myth Begin your presentation with a joke to loosen up the audience.

Fact Humor is an important component of any speech, but it must have relevance to the topic under discussion.

Myth Effective speakers do not use notes.

Fact Skilled speakers have found ways to use notes without distracting from their message. From your written copy, condense your remarks into outline form, and then create a second outline of keywords that will remind you of the full concepts designated by the keywords.

Myth Excellent speakers are spontaneous.

Fact Effective speakers rehearse their presentations. Practice is essential. The more familiar you become with your material, the more the words flow with passion. The more comfortable you feel with your words, the more naturally you present your speech. Good speakers practice… and practice again!

SOURCE: Based on "Add Spark to Your Speeches" by Rob Sherman in Association Management, January 2000. Rob Sherman is an attorney in Columbus, Ohio and author of Sherman’s 21 Laws of Speaking: How to Inspire Others to Action, Cedar Creek Press. E-mail

Timing Guidelines

We live in a fast-paced age so try to keep speaking engagements 20 to 25 minutes (but always allow additional time for Q&A). When writing and editing your speech, remember this general rule of thumb: Every double-spaced page of copy is about 90 seconds of speaking.

SOURCE: "Speak Like the Best of Them," by Daniel Cirucci, Association Management, 1993.

Speech Structure Checklist

An effective way to make the beginning, middle, and end of a speech work together is to use a basic rule of communications: Tell them what you’re going to tell them. Tell them. Tell them what you told them.

In the beginning, preview what is to come. In the middle, present most of what you have to say. In the end, summarize what you said.

SOURCE: "Speak Like the Best of Them," by Daniel Cirucci, Association Management, 1993.

Presentations: Be Prepared

For promotional tools for surety professionals, click


SFAA’s The Surety & Fidelity Association of America’s Newsletter

After many years of serving as a “Members Only” publication, subscriptions to The Surety & Fidelity Association of America’s Newsletter now are available industrywide. The Newsletter is published every other month and contains valuable information regarding industry developments, federal and state legislative activity, legal decisions, LSA activities, regulatory news, and coming industry events. Print out an order form to subscribe.

SFAA Subscriber Program

In response to increasing industry demand, SFAA’s Board of Directors has voted to provide those in the industry who are ineligible to become Members or Foreign Affiliates of SFAA the opportunity to become SFAA Subscribers. The subscriber service includes a newsletter; statistical reports; Binder of SFAA Standard Fidelity Forms; SFAA Manual of Rules, Procedures and Classifications for Fidelity, Forgery and Surety Bonds; a Web listing; and reduced rates on other publications and special data requests. For more information, contact Barbara Finnegan Reiff at

NASBP’s Pipeline

NASBP’s monthly periodical Pipeline covers current events in the surety industry; state-by-state legislative updates; coming meetings, conventions, trade shows, and seminars. To learn more visit NASBP’s Web site.

SIO’s Surety Bond Networker

Surety Bond Networker provides insight into PR, marketing, and promotion and recognizes the efforts of NASBP members, SFAA members, and LSA members at promoting surety bonds. It is perfect for surety professionals who are interested in seeing what other surety professionals are doing or who want to learn strategies and tips on promoting their product and business. To receive Surety Bond Networker, send an e-mail to

SIO’s LSA Communiqué

The LSA Communiqué provides LSA officers and members with resources and ideas for promoting contract surety bonds. It recognizes the efforts of NASBP members, SFAA members, and LSA members who promote surety bonds. To receive the LSA Communiqué, send an e-mail to

Working with the Media

Media Overview

Table of Contents

General Guidelines for Working with the Media
Understanding Reporters
10 Tips for a Successful Interview
Preparing a Media List
Creating a Positive Message

Editors of newspapers, magazines, radio, and TV news and talk show programs are always looking for information that will interest their readers and viewers. And to get a story about surety bonding in the media, it may just take a phone call or two. Suggestions and tips for success in working with the editors of radio, television, and the print media, newspapers, magazines, and trade journals, follow below. 

General Guidelines for Working with the Media

It pays to get to know the editors and reporters in your area. Regularly offer them opportunities to cover the role of surety bonds in our society. Remember that since they are interested in material that will interest their readers or viewers, present the material from the point of view of their audience. (For example: on the general pages –How surety bonds protect taxpayer dollars. On the business pages –How bonds protect investment dollars, lender dollars, and shareholder dollars, etc.) 

One more point: be alert for story ideas that give local slant on a nationwide trend or legislative happening. For example, if someone from your region receives a Tiger Trust award, inform the editor about the use of surety bonding in private projects. 

Remember: keep the facts about your suggested story on hand when calling a media representative and always follow through with what you say you are going to do. A few tips to capitalize on the persuasive power of media publicity: Tell the surety bonds story so it is able to advocate a position: "We advocate not changing the threshold of the Miller act." 

Offer advice: "When you build, BOND!" 

Tell what your organization has done: "The producer organization or local surety association has successfully counseled small, minority, women-owned contracting firms and has helped them receive their first bond." Give specific examples wherever possible.

Give the consumer benefit "Surety bonds save taxpayer dollars." Tie in with other happenings "The Iowa Surety Association applauds District Rep.’s bill to guarantee access to small contracting firms." 

Remember that news is what the editor says it is, and if your story offers a clear benefit to the media’s audience, you are more likely to receive coverage. Also, make it easy for the reporter to cover the story by providing fact sheets, additional information, and access to people to interview.

Understanding Reporters

Reporters typically have an agenda or angle. Of course, you can influence the reporters’ ideas and help shape their stories, but they write on their viewpoint based on their research and interviews, which may include several sources. Avoid making statements that might inadvertently strengthen an opposing view in the event the article takes a different angle than you would prefer. 

Reporters must meet deadlines. When a reporter calls, the first question should be, “When is your deadline?” Be courteous and help them meet their deadlines, and they will be more inclined to work with you.

Reporters have an obligation to present the source’s words as they are said. The quotations used may not include every word, and perhaps not in a way the source would like, but quotations should be accurate statements and not taken out of context. Reporters rarely show a story to a source before it is published. However, they may allow a source to review any quotations the reporter attributes. Not knowing what will be written is precisely what makes interviewing with the media a very risky proposition. 

10 Tips for a Successful Interview

Here are 10 tips to participating in an interview when a reporter calls on a local issue or story for which you have expert knowledge. If the reporter reaches you directly (as opposed to leaving a message for you), you may want to indicate that you will need to call back. Set an appointed time so you can complete the steps below:

1. Be prepared – Make sure you know the subject inside and out. Plan out what you want to say before the interview. What quotes do you want to be published? What do you want the reporter to know about the subject? Prepare your comments and what you want to say, and then return the reporter’s call. If the reporter is looking for information on a national level, or on a subject you are not completely familiar, refer to SIO, NASBP, and/or SFAA. 

2. Communicate Your Message – Be accurate, but try to communicate your message–one that puts the industry in the best light. This may mean that you not only respond to the reporter’s question, but that you add additional comments that get the industry’s points across too. 

3. Relax – Even though you should be prepared, your comments should not come off as “canned.” Speak in a conversational tone, but stick to the points you planned before the interview.

4. Realize Anything You Say May Be Quoted or Used – They may not attribute a statement to you, but the information you give may end up in the story in some fashion. Generally, if you don’t want it reported, don’t say it. If you are experienced in dealing with numerous press calls, you may be able to establish ground rules with a reporter, but this can be very tricky. For example, experienced public relations personnel or interviewees often will indicate to the reporter that they are only speaking on background and not for attribution. They may indicate to the reporters before the interview proceeds that any comments or information the reporter would like to quote or even use in the story must first be agreed upon. But establishing and enforcing such ground rules takes practice, so unless you feel that you can do this, assume anything you say may be quoted or used in the story.

5. Be a source, not an editor – Do not ask a reporter if you may edit or review a story. Reporters do not want advice on how or what to write, they want information. As noted above, under certain circumstances reporters may allow you to refine your own remarks or information, but they rarely allow you such opportunities with the rest of the article.

6. Strike “no comment” from your vocabulary – Never use the phrase “no comment.” It gives the perception you have something to hide and ruins your credibility. If you are legally advised to abstain from commenting on something tell the reporter, “I am not at liberty to discuss the matter.” They will understand. 

7. Be honest and direct – Do not avoid reporters or mislead them. If you do not know the answer, tell them that. As suggested above, use the reporter’s questions as a vehicle to make your point and communicate your message.

8. Be accurate – Be particularly careful with facts, figures, dates, and names. Errors of this nature hurt you in two ways. One, reporters never want to run a retraction or correction, so if you misspeak you make them look bad. Second, when a reader sees inaccurate information attributed to your statements, you lose credibility, which makes you look bad. 

9. Support the industry – If you make a statement that is detrimental to the image of the industry, there is a very high likelihood that the reporter will use it. After all, you have inside information and if you say things contrary to your expected position, that’s news. Also, when insiders say things against the industry it is much more detrimental than someone from outside the industry. Ask yourself this question before you comment, “Does this make the industry look good?” 

10. Respect deadlines – Find out what a reporter’s deadline is, and how much in advance of that deadline they will need to interview you. Do everything you can to accommodate their time constraints. If you do not have the time to respond, refer the reporter to SIO, NASBP, and/or SFAA. 

Preparing a Media List 

Setting up a card file or computer data base with the following information will help you in distributing information on surety bonds to the media. Research online or call each station to get the below information. 

(Name/call letters, e.g.: KDKA, WLS) (Frequency) 

Be sure to keep a record of the contacts you make with the station for future reference. 

Something to note: While certain off hours of the day (especially Sunday morning) aren’t exactly "prime time" or "drive time," people important to our product and industry do listen at these times. It’s easier to get something on the "air" at these hours, and keep telling yourself –"it’s advertising for the industry!" 

NAME (e.g. WCAU TV-1 0, Philadelphia): 


NAME (e.g. The Atlanta Constitution): 

NAME (e.g. ABA Journal, AICPA Journal, etc.): 

Media lists are only as valuable as they are up to date. After a mailing, be sure to track down new addresses for any returned envelopes. Auditing a press list annually is also a good idea to ensure the information is reaching the necessary groups. 

Creating a Positive Message

The words we use have a significant impact on how others perceive our industry. Here are some tips on how to keep a positive message in the public eye and contractors’ and owners’ minds.  

Elements of a Negative Message  Elements of a Positive Message
Portrays increased surety loss over the past two years as a result of poor/loose underwriting standards Portrays increased surety loss over the past two years as a result of a changing economy that increased the likelihood of default
Addresses problems the industry is facing and offers no solutions Addresses challenges the industry is facing and explains how the industry meets those challenges
Creates the impression that the surety industry is making changes to make up for poor job performance in the past Creates the impression that changes are being made to meet the demands of the current economy
Presents prequalification as an obstacle to the contractor bidding a job Presents prequalification as a service to guide the contractor to an appropriate workload and enhance his or her business
Generates fear that the industry is in trouble Generates confidence in the surety industry
Discusses how the contractor and owner must meet the demands of the
surety underwriter and producer 
Discusses how the surety underwriter, producer, contractor, and owner work as a team 
Focuses on surety bonding as a corporate industry Focuses on surety bonding as a person-to-person relationship
Describes the current state of the industry as being in turmoil Describes the current state of the industry as evolving to meet new
Illustrates the industry as over-promising Illustrates the industry as over-delivering
Builds anxiety toward the state of the industry Encourages patience with industry changes

Print Media

Table of Contents

Getting Surety’s Name in Print

Writing an Effective Press Release

Feature Article

Additional Print Media Tools

Errors in Print

Newspapers, magazines, and trade journals, the traditional print media, offer several unique ways to tell the surety bond story. Due to their format they can offer an in-depth approach to the topic.

Getting Surety’s Name in Print 

Seeing your byline in a trade publication is a thrill, and it is great PR for the industry. If you would like to publish an article, contact SIO and staff will gladly assist. SIO has extensive press lists for publications read by contractors, public owners, private owners, bankers, architects and engineers, and the surety and insurance industry.

Keep the following in mind when attempting to have stories appear in print publications:

  • Establish personal contacts – Get to know the editors and reporters of publications that may have an interest in surety bonds. These could be construction trade magazines, association newsletters, business journals, or local newspapers. SIO can provide a listing of local trade organizations.
  • Appeal to the audience – Before submitting an article to a publication, understand the readership and specifically address that audience’s interests. 
  • Provide local slant on nationwide trend – Editors often seek stories that explain how their readership is a part of or affected by the larger picture. Consider issues or trends that the audience may be facing now or in the near future.
  • Build Credibility – Editors want stories from credible sources. Explain what you, your business, or organization(s) with which you are affiliated have done to address the particular topic. 
  • Offer referrals – Make it easy for reporters to cover a story by providing fact sheets, additional information, and access to others to interview.
  • Please the editor – Editors determine what stories get placed and that they follow the style and guidelines for the publication. Find out how many words the editor prefers for an article. Read the publication prior to submitting and follow its style. 

Writing an Effective Press Release

A press release is a useful tool to obtain coverage on particular issues such as:

  • Elections/appointments of officers and committee members;
  • Announcing award winners;
  • News of specific projects in which the surety team is involved or has particular interest;
  • Announcements of seminars or conferences that your company or organization is sponsoring and/or participating. 

Send the press release to news media and publications whose audiences are interested in your message. SIO can provide you with contact information for trade associations in your state and sample press releases. Contact SIO at or (202) 686-7463.

Here are some tips for getting a press release published: 

1. Editors determine what is news – Editors want information that is of interest to the publication’s audience. Have a clear understanding of the readership, and tailor the press release to that audience.

2. Editors have little time – A press release immediately should state what the press release is about. In the first paragraph answer the “Who, What, When, Where, Why, and How” of the press release. 

3. Write in the third person – The press release should read as an impartial third party. Writing in the third person means using pronouns “he, she, it, and they” in response to who/what the press release is about. 

4. Use full names and titles when quoting – When quoting, provide the person’s full name and title so the editor knows the credibility of the source.

5. Accuracy is essential – Proofread for spelling and grammar errors; check for accuracy of information including location and dates of events; name, title, and affiliation of people; and verify statements of fact. 

6. Provide contact information – Include the name, phone number and e-mail of the contact person at the top of the press release. Press releases are alerts about news. Should the editor need to follow up or request a full article, contact information is critical.

7. Keep it to one page – Press releases should be typed on 8 ½” x 11” letterhead paper. Font should be no smaller than 11 point and the type double-spaced. If the release must be more than one page, number each page and type “-more-” at the bottom. 

8. Format is important – At the top, following the contact information and release date, have a concise but snappy head. On the next line, begin the press release with the date and city from which the news is coming. Type “-30-” or “###” at the end of the bottom of the last page to signify the end of the release.

Feature Article

A feature is an in-depth article written by a reporter about a specific topic. If a topic is timely and interesting to the publication’s audience, call the editor or a reporter who covers business news and suggest the topic. Be prepared to answer the question "Why will my readers be interested in this?" Tell the story to the editor or reporter from the reader’s viewpoint. 

Look for ways to enhance the story by photos and suggest these to the reporter. Provide plenty of written information to ensure the facts in the story are presented correctly. Cooperate with the reporter by helping to line up sources for interviewing and by providing additional information, if needed. 

Thank the reporter for his interest in the story and for fair coverage of the topic. Encourage the reporter to treat the feature story as a "round up" story that covers how the subject affects everyone involved. Suggest that the reporter cover all viewpoints. While opposing viewpoints may get mentioned, the story will usually have a broader perspective and the reporter will usually cover your viewpoint in more depth (after all, you gave him or her the story, did much of the background work and impressed him or her by your fairness). 

Additional Print Media Tools 


Editors love photographs. A good photograph draws in the reader and significantly increases the likelihood of publication. Here are some photo points to keep in mind:

  • Copyright – Just because you have a photograph in your hand (or on your computer) does not mean you have permission to print it. If you know who produced the photograph, request permission to use it. If you don’t know where the photograph came from, then do not use it.
  • Hard Copies – Mail in a photo-mailer and write “do not bend” on the outside. If you want the photograph returned, place a label on the back stating “please return to: name and address.” If you write on the back of the photo, use a grease pencil or felt-tip marker. Ballpoint pens distort the image on the reverse side. 
  • Digital photos – Resolution should be no lower than 300 dpi. Check with the publication for the preferred format (e.g. gif, jpeg, tif, etc.).
  • Tell the story –Avoid “grip and grins,” “hand-shaking,” and other “staged” photographs. Editors want “Action photos” and images that illustrate the article.
  • Explain the picture – On the back, identify the person(s), place, or event. 
  • Captions should captivate – Together, a good image and a well-written caption often tell the story much better than a lengthy press release. Explain the “who, what, where, when, why, and how” of the article/press release or the relevance of the photo to the story. 

Op-Ed Pieces 

These are opinion pieces written about a specific topic by someone not on a publication’s editorial staff. Usually the Op-Ed piece is an in-depth discussion about a subject that has generated interest by the news media. The advantage of an Op-Ed piece is that this is one of the rare times you have control over what is published. 

Letters to the Editor 

It is also possible to present the surety bond story through letters-to-the-editor. Keep the letters short and to the point. A successful letter will refer to something covered in the publication recently or something "happening" in the government arena. 

Good topics for letters to the editor are: 
1. Your organization’s reaction to proposed changes in the Miller Act or Little Miller Act. 
2. Your reaction to the practice of government waiving bonds. 
3. Minority access to surety bonds. 
4. The risk of accepting personal sureties. 
5. The rigorous process of prequalification and its importance. 

Fact Sheets

These can be a valuable tool in providing the press with factual information. These are especially useful on complex topics. A listing of the major elements of a story can save time for both the reporter and the source. Fact sheets don’t have to be long, but should cover the factual information and include all appropriate facts, figures and statistics. 

You may also find that reporters frequently call with similar questions. Background fact sheets can be helpful in saving you time in releasing information.


It is a good idea to keep on hand up-to-date biographies of anyone in your organization who might be newsworthy. This can save time for both you and the reporter. Also make sure that recent photographs are available. Nothing can make an official look more ridiculous than having a 20-year-old photograph published in the local newspaper. 

News Conferences 

An excellent method to use in making a big, important announcement. But these are rare and you should consult with the Surety Information Office beforehand. Always have something prepared, such as a press release, fact sheet or press kit available for the reporters attending the conference. Also try to start on time, since reporters face problems with deadlines. Don’t give one reporter an advance on what is going to happen, while the others are left in the dark. 

News Briefing

A useful method of having continuing contact with the press on a controversial topic, such as ongoing debate on upcoming surety legislation. The briefings give re- porters and company officials an opportunity to discuss the problem in a non-crisis atmosphere. Since reporters cover the briefings on a regular basis, it will also help develop their understanding of the surety bond industry. 

Media Advisory 

A brief announcement of an upcoming event, which reminds reporters and editors that coverage is invited. The memo should list the event, where it will take place, time, who will be there, what specific photo opportunities will be available, and the person to contact for additional information. 

Errors in Print

Nothing stings like reading an article where you’ve been misquoted or the facts are misstated. No matter how you feel, avoid the temptation to call the reporter and give him/her a piece of your mind. First, make sure it truly is an inaccuracy. If the facts or quotations are incorrect, then bring it to the attention of the reporter. If it is a difference in perception of the facts, then it may be best to let it go and not damage your relationship with the reporter. 

If you find an error, call the reporter to request a correction. Tell the reporter precisely where the mistake was made. Don’t complain about the way the publication covered the story – that’s their prerogative.

Broadcast Media

Table of Contents


The needs of broadcast reporters are obviously different from those of their print counterparts. This section discusses briefly some of the particular situations faced by broadcasters. 

Don’t let the prospect of being interviewed or "going on the air" make you overly nervous or reluctant to follow through. Radio and TV interviews are, by and large, not hostile situations. You’ll do quite well – especially if you are prepared. Don’t hesitate to contact SIO before appearing on either format.


Radio, with its talk shows, public service announcements, and news stories, is one of the best and simplest ways to get coverage to the business community. 

Reporters in this medium need tape, sometimes miles of it. You may be called upon to do an actuarial, which simply means being interviewed on tape. If the reporter is taping you over the telephone, you must be informed in advance before the taping begins. As was discussed in the section on interviews, try to relax and sound natural, but remember you are as good as "on the air" when the tape is running. The reporter’s "cue" to you that taping has begun will sound something like this –"OK, we’re rolling tape now…" 

Radio is also the most immediate medium there is. Deadlines occur every minute. This means radio reporters are almost always in a hurry. Reporters in radio often note that "television reporters are frustrated actors, newspaper reporters are frustrated writers, and radio reporters are just frustrated." 

Arranging for a Radio Talk Show Interview

1. Select the talk shows you would like to have carry the surety bond message. Listen to them. Based on the topics covered by the show, who is the audience? Does the show cover business related topics? Is the audience interested in surety bond information? 

2. Choose a specific topic – e.g. bonds in general, the Miller Act, private sector interest in surety bonding or surety bond availability for minorities and women. 

3. Prepare a fact sheet or a list of questions and answers about your topic.

4. Choose a speaker – someone who is knowledgeable about the topic, can communicate in a clear pleasant voice and is active in your local surety association. 

5. Call the talk show’s producer and introduce your topic, explaining why it is interesting to his listeners. Ask him/her to interview your speaker on his/her show.

6. Write the show’s producer a note thanking him/her for the upcoming interview and send the fact sheet, a short biography or resume of your speaker and additional information about surety bonds. And possibly a list of questions he or she can ask. The least sophisticated interviewer will generally ask each suggested question almost verbatim. The most sophisticated interviewer may only ask one or two of the prepared questions. The rest will be rephrased and several more pointed questions will be added. 

7. Fax or send a memo to the fellow members of your local surety association and SIO asking to listen to the broadcast. Assign someone to tape the broadcast as well. 

8. Before the broadcast, your speaker should practice stating points he or she plans to make in a clean, positive, friendly, and succinct fashion. Use simple English and avoid complex sentence constructions. Limit the use of synonyms for a word or topic. Don’t use pronouns, stick with proper names. Use lots of verbs. Give statement attributions at the front of a sentence not at the end. 

9. The day of the broadcast, the speaker should arrive 15 minutes early to get organized and to chat and get to know the talk show host. Before you go on the air, ask the talk show host if the material you sent was useful and if he or she has any questions. (This serves these purposes: 1) It opens the line of communication between the speaker and the host; 2) it helps to warm up and relax the speaker and 3) helps to focus the topic for the interview.)
During the interview try to stay relaxed. Be calm and work into your statements the key points you wish to make. In nearly every case, you won’t be in an adversarial relationship with the talk show host. So just relax and enjoy talking about what you know best, suretyship. 

On the radio, unlike TV, you may use note cards with key reminder points. Make these on index cards, arranged logically. 

Sample Questions to a Radio Interview 

(Taken from an interview of James M. Maloney, Past-President, NASBP, on KLHI FM radio, Maui, Hawaii, April 28, 1993, 7:00 a.m. "drive time.") 

1. What is a surety bond? 
2. Who pays the cost (premium)? 
3. What does a surety company do? 
4. Who does the surety bond protect? (e.g. owner, subcontractor, laborer, TAX-PAYER, banker or lending institution.) 
5. Are surety bonds required by law? 
6. Are surety bonds used in private construction? 
7. Do many contractors fail? (Yes –high peril business. Dun & Bradstreet (1992) 12,300 contractors failed –$5 billion loss!) 
8. What is prequalification? 
9. If a contractor fails, who pays the claim? All of it?
10. What causes contractors to fail? 
11. Are low bidders on public projects by nature high risks? 
12. Does surety bonding work like other insurance where the premiums are put into a pool, and only a few suffer losses? 
13. How does the surety underwriter make judgments about the contractor’s ability to do the job? the surety bond producer part of the system of awarding contracts to the contractors? 
15 Can small contractors get bonds? 
16. What is the Small Business Administration Surety Bond Guarantee Program? 
17. Can minorities get bonds? 
18. What is the NASBP? 
19. What is the SFAA? 
20. What is the goal of your organization?  

NOTE1: A list of helpful questions should be provided to the interviewer. It helps the interviewer and it helps you better focus your presentation.
NOTE 2: This is simply a sample list of questions used in the interview. It will change dramatically according to the scope of the topic, the audience the station appeals to, your knowledge of the host and the host’s knowledge of the industry, to name but a few variables. 

Radio News Shows 

If you have a topic that is timely, for instance a statement in reference to an action in the state legislature, call the editor of the radio news program, introduce yourself and be prepared to make your statement or participate in a short interview, right there, over the telephone. 

Always make a list of the points you wish to make and place them in front of you for easy reference during the phone interview. Always answer the interviewer’s questions, but in expanding on these answers, be certain to make the points you want to make – without rambling on, of course. 


Television, with its mix of sound and pictures is the most persuasive medium available. Television talk shows and news broadcasts offer an unparalleled opportunity to persuade its audience. 

TV reporters need good film footage. They want to avoid talking heads as much as possible. These shots of someone speaking are boring to viewers, according to TV news producers. TV needs action, action, action! Instead of interviewing you in your office, the TV reporter will most likely prefer an on-site interview, with some action in the background. Construction sites make great backdrops. There’s a lot of activity almost all day long. 

There also may come a time when you will be asked to appear on a television interview program. This is often an excellent opportunity to present our point-of-view. Try not to think about the television cameras while you are being interviewed. Again, relax and be yourself. But remember television thrives on controversy. Be prepared with short, concise answers. 

Talk Shows 

1. Select the talk shows you would like to have carry the surety bond message. Listen to them. Based on the topics covered by the show, who is the audience? Does the show cover business related topics? Is the audience interested in surety bond information? 

2. Choose a specific topic – Ask yourself if there is anything visual that illustrates your point? Perhaps a building that was unfinished due to contractor failure. Get permission from the owner and take a slide photo. 

3. Prepare a fact sheet or a list of questions and answers about your topic. 

4. Choose a speaker – someone who is knowledgeable about the surety topic, can communicate in a clear pleasant voice and is, preferably, someone clearly aligned to your region or local surety association. Your speaker should also pay close attention to their appearance by wearing appropriate attire and being well-groomed. 

5. Call the talk show’s producer and introduce your topic, explaining why it is interesting to his/her listeners. Ask him/her to interview your speaker on his/her show. 

6. Write the show’s producer a note thanking him/her for the upcoming interview and send the fact sheet, a short biography or resume of your speaker and additional information about surety bonds. 

7. Fax or send a memo to the fellow members of your local surety association and SIO with information on the broadcast. Assign someone to videotape the broadcast as well. 

8. Before the broadcast, your speaker should practice stating the points he or she plans to make in a clean, positive, friendly, and succinct fashion. Aim to follow these guidelines. Use simple English and avoid complex sentence constructions. Practice speaking looking into an imaginary camera. Memorize as much information as you can; you don’t want to be fumbling with note cards on TV. 

9. The interviewee should dress for the camera. Avoid loud plaid jackets and bright colors. Go for a conservative look with traditional business attire. Avoid extremes in dress and hairstyles. Arrive 30 -45 minutes early and ask the station’s make-up artist to powder your face and help with shiny noses and foreheads. Don’t be afraid of the make-up. It helps avoid the camera "telling all!" Remember, you only need to look at the interviewer when answering question. Simply block out any other activity that is taking place on the set – the camera will find you.

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Program Development

Education & Seminars

Education or Continuing Education

SIO has several links on its Web site to organizations that offer classes, seminars, and continuing education courses for surety professionals.

Conducting Your Own Seminars

Checklist for seminar planning:

  1. Six months before the seminar: Decide the parameters of your seminar. Who is it for? On what topic(s)? When will you hold it? Where? Who will speak? How long will the seminar last? Will there be food? (A light meal is a great way to get people together.)
  2. Three months before the seminar: Finalize the arrangements with the speakers, the meeting place and caterer, etc.
  3. Prepare the invitations to the seminar (they can be standard formal invitations, an oversized post card or a letter) and develop the mailing list. Appoint someone to keep track of responses and answer questions.
  4. Decide who will be the moderator for the seminar. Have the speakers give you a list of their equipment needs (slide projector, overhead projector, etc.) and a copy of their presentation outline.
  5. Two months before the seminar: Mail the invitations and keep track of the responses. Arrange to have the appropriate equipment on hand (most hotels and conference centers have projectors and other equipment that you can use.)
  6. Send a press release to appropriate media announcing the seminar and featuring the speakers.
  7. One month before the seminar: Visit the site of the seminar. Determine what signs you might need. Check to make sure the facilities are adequate.
  8. Contact your speakers and reconfirm their commitment. Arrange for a thank-you gift for your speakers.
  9. Prepare information kits to give seminar attendees. Include an agenda, biographies of the speakers, information on the topic and on bonding in general, a description of your organization, an evaluation form and a list of contacts for further information.
  10. One week before the seminar: Prepare name badges for those attending the seminar. Contact the site and the caterer to inform them of the number attending. Recruit helpers for the day of the seminar.
  11. The day of the seminar: Arrive at the site as early as possible. Put your helpers in charge of placing signs in the appropriate places, staffing the registration/ welcoming table, and talking with any reporters who cover the event.
  12. Take photos during the seminar. Assign one helper to take notes or tape record or videotape the speakers’ presentations (with the speakers’ permission, of course).
  13. Ask the attendees to complete the evaluation form.
  14. Thank the speakers publicly and present the gift.
  15. The week after the seminar: Write thank you letters to the speakers. It’s also a good idea to thank your attendees for coming and ask them if they need more information.
  16. Within a month following the seminar: Evaluate the seminar and plan ahead.

Legislative Affairs


SFAA is active in federal and state advocacy on surety and fidelity issues both in a legislative and regulatory context. SFAA partners with the American Insurance Association (AIA) in a manner that draws upon the strengths of both organizations to affect surety and fidelity issues. The AIA has a significant state and federal legislative network, and the SFAA provides the AIA regional managers and state counsel with substantive analysis of and policy positions on legislation and any talking points, testimony and other materials needed to address pending legislation, as well as government affairs expertise and grassroots support as needed from the local surety associations. SFAA arranges for staff and member company representatives to testify as needed at hearings. SFAA participates in weekly joint trade calls with the AIA and the NASBP to coordinate legislative and regulatory activities. The SFAA provides legislative information to all LSAs and coordinates its legislative activity in any state with the LSA.

SFAA keeps its members informed about legislation and regulation affecting surety and fidelity. The SFAA Monthly Legislative Report is a comprehensive federal and state-by-state report that assists members in getting information about, and being proactive on, legislation of importance. The report lists new bills that were introduced since the last report and contains the status of bills that had significant movement since the preceding month, which means that the bills have either passed out of committee, passed one House in the legislature, or are on their way to the governor for signature. The monthly legislative report includes a highlights feature, which gives SFAA members an upfront summary of recent enactments of new bond enactments and reductions/eliminations of existing bond requirements.

The SFAA monthly legislative reports are sent electronically to the SFAA Government Affairs Advisory Committee and to the local surety associations. They also are available on the SFAA Web site to all SFAA members. These reports are presented by line of business – contract surety, commercial surety, and fidelity – so that SFAA members can more easily obtain and review the information of most interest to their companies. The monthly reports show the bills by state. During peak times in the state legislative sessions, SFAA may publish these reports more frequently than monthly.

In addition, SFAA publishes a monthly legislative overview, which summarizes state legislation by key issues and topics, rather than by state. These reports also are sent to the Government Affairs Advisory Committee and the LSAs and are available on the Web site.

The Monthly Regulation Report keeps SFAA members informed of the previous month’s federal and state proposed, final, and emergency regulations. In addition to describing any action SFAA has taken on these regulations, the report details how members can submit comments on regulations so that they can be proactive on regulations of importance to them.

SFAA uses a variety of sources for its legislative and regulatory information. SFAA staff welcome input and additional information from all LSAs.


SFAA Government Affairs: Lenore Marema, Vice President of Government Affairs, (202) 778-3637, (202) 463-0606 fax,; Daniel Wanke, Associate Analyst, (202) 778-3631, (202) 463-0606 fax,


Founded in 1942, the National Association of Surety Bond Producers (NASBP) is the voice of surety bond producers with government and industry, assuming a vital leadership role in promoting and defending suretyship in the functioning of government and commerce.

The strength and fulfillment of NASBP’s government relations initiatives rests with the many efforts of its volunteer members, who work with professional association staff to accomplish NASBP’s government relations agenda at all levels of government. NASBP staff regularly develop grassroots tools, such as model letters and educational articles on surety topics, for NASBP members’ use in educating their legislators, clients and others. NASBP mobilizes its grassroot networks at federal, state, and local levels to address legislation and regulations impacting surety bonding and other related issues.

NASBP works tirelessly to preserve and defend bonding requirements, such as the Miller Act and state “Little Miller Acts.” Throughout the year NASBP staff track and comment on legislation and regulations at state and federal levels.

Another aspect of NASBP’s government relations efforts includes the support and management of NASBP’s Political Action Committee, the SuretyPAC. The SuretyPAC supports Congressional candidates who understand the value that surety bonding brings to the efficient functioning of government and commerce, benefiting their communities and constituencies.

NASBP also complements its government relations efforts with outreach to key industry groups. NASBP works closely with surety companies, construction industry partners, and other key organizations to advance the use and understanding of surety bonding. NASBP also pursues partnering agreements with key groups, such as construction industry associations. These strategic partnerships enhance and expedite communications between the organizations on a variety of important issues, including the state of the surety market, the importance of bonding requirements to preserve payment protections, and effective risk management practices.


Kathy J. Mapes Hoffman, Assistant Director, Government Relations & Communications, (202) 464-1175, (202) 686-3656 fax,

Community Outreach & Special Events

Special Meetings

In addition to regular meetings, LSAs may offer study groups, workshops, and other special functions to members. Any fee usually covers the cost of a featured speaker, handout materials, a meal (if appropriate), room rental, etc.

Other meeting ideas include:

  • Social & Networking Opportunity – Golf Tournament, Christmas in July, Jobsite Tour, Holiday Party.
  • Community Services – Habitat For Humanity, Toys For Tots, National Association of Women in Construction Block Kids Program, American Red Cross, food drives.
  • Education – Scholarships, guest lectures at high schools and colleges, Career Day.
  • Legislative – State Department of Transportation, state Department of Development, meetings with state Representatives and Senators and/or their offices, state Contractors Board officials, or other public agencies.

Assisting Emerging Contractors (MCDP)

SFAA is actively involved in a variety of programs and activities to assist LSAs and their respective contractor communities to further the goals of access to bonding and increased bonding capacity for emerging contractors.

The Model Contractor Development Program

Launched in 2001, the Model Contractor Development Program (MCDP) is an SFAA program designed to increase access to and availability of bonding to minority, women, and other emerging contractors. The Model Contractor Development Program objectives include:

  • Educate small, minority, and women contractors about surety bonds and help them become bondable.
  • Identify resources available to small, minority, and women contractors in obtaining their first bond, such as the SBA Surety Bond Guarantee Program and similar federal, state, and local programs.
  • Provide assistance and referrals to small, minority, and women contractors in obtaining appropriate accounting, project management, and financing expertise.
  • Assist small, minority, and women contractors with increasing their bonding capacity.

The MCDP is composed of two interrelated components: 

The educational workshops component offers a set of eight comprehensive workshops, each of which is designed to provide information to the contractors related to improving their company’s operations and thereby making it easier to be bonded or to increase their bonding capacity. Specific seminars or workshops are available on: 

  • Business Planning and Management for Construction
  • Construction Accounting and Financial Management
  • Banking and Financing for Contractors
  • Bonding and Insurance for New and Emerging Contractors
  • Marketing, Estimating, and Bidding
  • Project Management and Field Operations
  • Claims and Dispute Resolution
  • Success Stories: Why Some Contractors Succeed and Others Fail

The bond readiness component consists of one-on-one interactions with surety bond producers, underwriters, and other professionals who work with the contractors on a case-by-case basis in assembling the materials necessary for a complete bond application and in addressing any omissions and/or deficiencies that might deter the successful underwriting of a bond. In this component, SFAA uses the network of local surety associations to identify one or more surety professionals in the various local areas to volunteer to assist these companies in becoming bondable or increasing their bonding capacity.

To support this program, SFAA has prepared a handbook for locals surety associations, Increasing Access to Surety Bonding – A Handbook for Establishing a Local Contractor Development Program, which is available in the Development & Diversity section of the SFAA Web site at

Technical Assistance to Federal, State and Local Jurisdictions

An outgrowth of the Model Contractor Development Program is SFAA’s increasing role in the provision of technical assistance to federal, state, and local governmental entities in developing programs of bonding support for emerging contractors that want to do business with these jurisdictions. Generally, SFAA works with the relevant LSA in the particular area and these joint efforts have ranged from informational and educational programs for contractors to formal bond guarantee programs. These efforts demonstrate that early involvement of the surety industry in the development and implementation of bonding support programs has been and will continue to be an important contributor to their success.


SFAA Development & Diversity: Samuel A. Carradine, Director of Development and Diversity, (202) 778-3638, (202) 463-0606 fax,

Small Contractor Brochures

The SBA’s Surety Bond Guarantee Program brochure published by SIO summarizes the U.S. Small Business Administration’s program, which helps small and emerging contactors obtain bonds. This publication examines:

  • Program eligibility;
  • Prior Approval Program;
  • Preferred Surety Bonds Program; and
  • The necessary application forms and documents.

Click here to view and print this brochure.

Helping Contractors Grow: Surety Bonding for New & Emerging Contractors provides
information on surety bond assistance and support programs and mentor-protégé

Click here to view and print this brochure.

Why Do Contractors Fail? outlines the events that lead to contractor
failure and the warning signs that a contractor is in trouble.

Click here to view and print this brochure.


SIO Awards for Excellence in Surety Bond Promotion

The SIO Awards for Excellence in Surety Bond Promotion honor Local Surety Associations (LSAs) with two levels of achievement and individual NASBP and SFAA members with one level of achievement:

Local Surety Associations

  • Silver Award—for LSAs that conduct at least five public relations activities in a calendar year to promote the value and benefits of contract surety bonds.
  • Gold Award—for LSAs that conduct at least 10 public relations activities in a calendar year to promote the value and benefits of contract surety bonds.


  • Platinum Award—for an individual NASBP or SFAA member whose efforts to promote contract surety bonds have had a significant impact on the construction industry. This award is not based on the volume of activities, but on the successful outcome of the individual’s actions in promoting the value and benefits of contract surety bonds.

Examples of Public Relations Promotional Activities

Outreach (To private owners, public owners, lenders, government agencies, risk managers, contractors, subcontractors, minority contractors, architects, engineers, attorneys, CPAs, universities, and their respective associations)

  • Give presentations on the value and benefits of contract surety bonds.
  • Conduct meetings/seminars to discuss the protections surety bonds provide.
  • Organize an initiative to inform audiences on the benefits of surety bonds.
  • Set up a surety display and distribute information at expos, conventions, meetings, career fairs, or other gatherings.
  • Sponsor, develop, or present non-compensated continuing education courses to a non-surety industry audience on contract surety bond-related issues.
  • Inform Legislators and their staff on how surety bonds protect taxpayer dollars, prequalify contractors, and guarantee project completion.

Media Relations (Please provide publication clippings, PDFs, or audio/visual files to support the nomination)

  • Write articles on surety bonds for external magazines, newsletters, or other publications.
  • Produce Public Service Announcements on the benefits of contract surety bonds.
  • Participate on a TV/radio program, talk show, or news story.
  • Distribute press releases or provide information to the media on the value and benefits of contract surety bonds.

Community Outreach (Must promote the value and benefits of contract surety bonds in the name of the LSA or bring public relations value to the LSA’s name. The weight given to these secondary activities will be determined by the judges.)

  • Spearhead a community service or volunteer initiative.
  • Provide a scholarship to a student or endowment fund in a construction-related program.
  • Serve as a surety mentor to students at construction trade schools/college programs.
  • Participate in a career fair to promote surety as a career or raise awareness of the importance of contract surety bonds in construction.

View SIO Awards for Excellence in Surety Bond Promotion Criteria & Nomination Form.

Tiger Trust

In 1984, the very elite group known as the Tiger Trust was formed to recognize SFAA and NASBP members who persuade a private construction project owner or lender to require surety bonds on a project. Today, the Tiger Trust continues to be one of the most prestigious honors SFAA and NASBP members can earn. Tiger Trust members demonstrate an extraordinary commitment to the principles of suretyship and have achieved individual distinction by educating private owners about the value of contract surety bonds.

Because the private sector offers the greatest potential for contract surety growth, it is important for surety professionals to become actively involved in persuading private owners and lenders to specify contract surety bonds on their projects. SIO proudly confers upon all qualified applicants the distinction of the Tiger Trust. To apply for the Tiger Trust and join the other members of this elite group, simply fill out the nomination form and send it to SIO with the requisite documentation. All winners will be inducted to the Tiger Trust and receive their certificate and pin at the SFAA and NASBP Annual Meetings.

View Tiger Trust Criteria & Nomination Form.

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Why Bid, Performance & Payment Bonds Are Required For Public Construction Projects

Virtually all of the public construction work in America is accomplished by private sector firms. This work generally is awarded to the lowest responsive bidder through the open competitive sealed bid system. Surety bonds play a critical role in making the system work.

The Bid Bond is intended to keep frivolous bidders out of the bidding process by assuring that the successful bidder will enter into the contract and provide the required performance and payment bonds. If the lowest bidder fails to honor these commitments, the owner is protected, up to the amount of the bid bond, usually for the difference between the low bid and the next higher responsive bid.

The Performance Bond secures the contractor’s promise to perform the contract in accordance with its terms and conditions, at the agreed upon price, and within the time allowed.

The Payment Bond protects certain laborers, material suppliers and subcontractors against nonpayment. Since mechanic’s liens cannot be placed against public property, the payment bond may be the only protection these claimants have if they are not paid for the goods and services they provide to the project.

Protection By Law

In most cases, bid, performance and payment bonds are required by law on public construction projects. Since these laws have existed for several decades, few give much thought as to why such laws were enacted. Some contractors who cannot obtain the required bonds, complain that the laws are unfair because they, in effect, are denied access to public construction projects. Let’s examine what gave rise to these laws that require contractors to post bonds when they perform public construction projects.

Slightly more than 100 years ago, the federal government became alarmed about the high failure rate among the private firms it was using to perform public construction projects. It discovered that the private contractor often was insolvent when the job was awarded, or became insolvent before the project was finished. Accordingly, the government was frequently left with unfinished projects, and the taxpayers were forced to cover the additional costs arising from the contractor’s default.

Since government property is not subject to mechanic’s liens, the laborers, material suppliers and subcontractors were without remedy if they were not paid for their services. To protect itself and those who worked on its projects, the government tried using individuals to serve as sureties. However, many of these individual sureties failed to honor their commitments, often because they did not have the financial resources to cover their obligations. So, in 1894, Congress passed the Heard Act to authorize the use of corporate surety bonds to secure privately performed federal construction contracts. In 1935, the Heard Act was replaced by the Miller Act, which is the current law requiring performance and payment bonds on federal construction projects.

It is important to note that bid, performance, and payment bonds are not intended to protect the contractors that have to post them. Instead, these bonds are intended to protect the owner of the construction project against contractor failure and to protect certain laborers, material suppliers, and subcontractors against nonpayment.

Assuming The Risk

There are only two alternative methods of performing public construction. The government may perform the contract with its own forces or retain a private contractor to perform the construction contract.

If the government uses private contractors, which ones should be chosen? Those who are solvent or those who are insolvent? Those who have the technical ability to perform the contract or those who don’t? Those who will finish the contract on time and at the agreed upon price or those who won’t? Those who will comply with the plans and specifications or those who will cheat? Those who follow safety procedures and operate a safe job site or those who cut corners?

The answers should be obvious. However, all contractors when seeking work will say that they are solvent, honorable, and qualified to perform the project. Of course, some may be stretching the truth.

Thus, the construction project owner would be foolish to hire any contractor that happens to walk in the door. Some prequalification screening of contractors obviously is necessary. The government elected to use the surety mechanism, so the surety assumes the prequalification responsibility and protects the government against loss when a bonded contractor defaults.

Why The System Works

Even though the taxpayers, laborers, material suppliers and subcontractors would be left without protection if there were no bonds, some people suggest that government employees should prequalify the contractors that perform government construction projects. For a number of reasons, contractor prequalification by government employees is an unattractive alternative.

For instance:

  • Every contractor is unique and every construction project is different. Thus, it is impossible to use purely objective standards in making sound contractor prequalification decisions. A subjective decision made by government employees is difficult for the government to defend if it is challenged by a disappointed applicant.When the private surety industry is used as the prequalifier of the contractor applicant, this problem is eliminated for the government.
  • Contractors that are rejected by a government official have no place to go in search of a different result except to court. Lawsuits are expensive and time-consuming. Of course, if the suit succeeds, the government is now forced to use a contractor it wanted to avoid.When a contractor is turned down by a surety, the contractor may seek a different result from a competitor.
  • When a government prequalifier makes a mistake in judgment, the taxpayer pays for the loss, not the government official who made the bad decision.When the surety makes a mistake in judgment, it pays. This forces the surety to make prudent prequalification decisions, thus the government and the taxpayers are protected.
  • Whenever government officials are responsible for deciding which private contractors will be allowed to perform public contracts, it is virtually impossible to prevent contractors from using political influence to obtain a favorable prequalification decision.When private sector sureties are used, the potential for such corrupt activity is practically eliminated.
  • Contractors may be reluctant to divulge business information to a government prequalifier who is, in effect, a representative of the potential owner of the construction project.With private sector sureties, contractors are submitting their applications and business information to a third party, the surety, and not the party they will be contracting.


The use of corporate surety bonds makes it possible for the government to use private contractors for public construction projects under a competitive sealed bid, open competition system where the work is awarded to the lowest responsive bidder. Political influence is not a factor, the government is protected against financial loss if the contractor defaults, and certain laborers, material suppliers and subcontractors have a remedy if they are not paid, all without consequence to the taxpayer.

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The Surety Safeguard: How Bonding Protects Taxpayer Dollars

Click here to download the PDF version.

The Surety Safeguard

More than 80,000 contractors have failed from 1990-1997, leaving a trail of unfinished private and public construction projects with losses of nearly $22 billion, according to Dun & Bradstreet’s Business Failure Record. Yet there was no need for a government bailout on uncompleted public works projects. Taxpayers were protected against virtually all losses caused by contractor failure.

That’s because surety bond companies provided the resources necessary to complete the projects and pay certain bills for laborers, material suppliers, and subcontractors. Obtained by contractors from surety bond companies, surety bonds transfer the risk of contractor failure to the surety bond company.

When a government entity awards a construction project to the lowest bidder, it knows that the surety bond company stands behind the contractor’s promise to complete the job according to the owner’s specifications and terms of the contract.

A Long History

The idea behind surety bonding is simple and direct. One person guarantees to another that a third person will perform.

This concept isn’t new. In fact, the Bible refers to surety bonding in Proverbs 11:15. “He that is surety for a stranger shall smart for it, and he that hateth suretyship is sure.” However, the ancients used individuals instead of surety bond companies, and these individuals often proved to be unreliable. The earliest recorded attempt to form a company to engage in the surety business was in 1720. And in 1865, the United States’ first corporate surety bonding company, the Fidelity Insurance Company, was formed.

Concerns About Contractor Failure

In 1894, Congress passed The Heard Act in response to concerns about the large number of contractors working on public projects who became insolvent and in response to complaints from unpaid subcontractors. The Heard Act was supplanted by the Miller Act in 1935. Since then, the federal government has required that contractors obtain surety bonds for public works, and virtually all the states have followed with their own statutes, called “Little Miller Acts.”

Today, surety bonds protect almost every public construction project across the country. In 1997, nearly $160 billion in public works projects were under construction throughout the United States with surety bonds providing valuable protection against contractor failure.

Surety Speeds Rush Hour Traffic
An $18.4 million construction contract in Leon County, Florida called for the widening of a major roadway from four lanes to eight at the most traveled intersection in the City of Tallahassee. The contract specified construction of a flyover bridge, access ramps, improvements to numerous feeder roads, and access points to dozens of businesses.When the contractor faced financial difficulties, the surety company worked closely with the contractor to maintain normal financial and business operations. Not only did the project continue without interruption, it was completed ahead of schedule.

The surety’s Large Loss Team, comprising a claims representative, home office accountants, an engineer, and external consultants, analyzed the necessary information and developed a plan to complete the project.

The surety paid labor and material suppliers from a joint account into which all contract payments were deposited. The surety made frequent visits to the project and provided engineering expertise and retained a consulting firm familiar with contract surety default matters. The firm reviewed all project payments to subcontractors and suppliers and provided technical assistance on the day-to-day operations.

The County Board of Commissioners expressed its appreciation to the surety stating, “[The surety] has proven its resourcefulness and dedication to efficient and smooth running operation,” and completion was a result of the surety’s “quest for excellence and proven service.”

Why Bonds?

One-half of all construction firms in business today will not be in business six years from now, according to the Associated General Contractors, a construction industry trade association. Anyone familiar with the construction industry knows there is a long list of potential problems that can lead to default or bankruptcy if they are not addressed properly. An economic downturn, labor difficulties, material shortages, the death of a key employee, equipment problems, bad weather, even fraudulent activity, can bring a project to a standstill, often causing the contractor to default and bills to go unpaid.

No construction project owner-public or private-can gamble on an unreliable contractor who could go bankrupt halfway through the job. A state highway department, for example, wants to be sure that the contractor hired to build a new bridge will be technically competent and financially fit. This state agency has an added concern: how can it be sure the lowest bidder-with whom it must contract under the low-bid system used in awarding most public works contracts-will be dependable and not cause a drain on state taxpayers’ money?

Surety Bonds Protect Public Funds

This essential assurance to the public is provided by bid, performance, and payment bonds.

Bid Bond provides financial assurance that the bid has been submitted in good faith and that the contractor intends to enter into the contract at the price bid and provide the required performance and payment bonds.

Performance Bond protects taxpayers against financial loss should the contractor default or fail to complete the job according to the terms and conditions of the contract.

Payment Bond guarantees that the contractor will pay certain laborers, material suppliers, and subcontractors associated with the project.

Bid, performance, and payment bonds are three types of contract surety bonds. Surety bond companies offer several other types of bonds which are described briefly at the back of this booklet.

A surety bond is a risk transfer mechanism: the risk of contractor default is shifted from the project owner (the government or a private party) to the surety company. If contractor failure does occur, it’s the surety company that remedies the default-not the government, not the taxpayer. When a contractor provides a surety bond, the public can be assured that the contractor has met the rigorous prequalification standards of an independent third party, the surety bond company. It is important to note that bid, performance, and payment bonds are not intended to protect the contractors that post them. Instead, these bonds are intended to protect the owner of the construction project against contractor failure and to protect certain laborers, material suppliers, and subcontractors against nonpayment. Since mechanic’s liens cannot be placed against public property, the payment bond may be the only protection these claimants have if they are not paid for the goods and services they provide to the project.

Surety’s Quick Thinking Keeps Subs Paid and On the Job
A contractor hired by a local government to construct a municipal building abandoned the project with 75% of the structure completed. Since the contractor defaulted, the owner called upon the surety to arrange for completion.The surety’s investigation determined that the contract with the contractor had been properly terminated due to abandonment of the project and non-performance. In order to meet its obligations, minimize loss, cost, and expense, the surety hired (at its own expense) a construction management consultant to assist with the claim.

It was imperative for the surety to respond quickly since the structure would suffer extensive damage if not completed before winter weather set in.

The surety and management consultant determined the condition of the work site, quality of work completed, and the new projected completion date. The surety expedited the project by using the original subcontractors and suppliers on the project.

The surety hired a field superintendent to monitor the work site. The surety and architect reviewed payment claims and convinced the project owner to pay subcontractors and suppliers for unpaid work. Within four weeks of the subs returning to the job site, the municipality obtained a Substantial Completion Certificate and was given partial occupancy. The full Certificate of Occupancy was given to the owner four weeks later.

Cost to complete the building was $356,034. Liquidated damages of $22,500 and potential cold weather damage to the building was avoided. The surety’s loss was $46,379.

Protection Through Prequalification

Surety underwriting focuses on prequalifying the contractor. This prequalification process is critically important. The surety bond company is committing its assets to guarantee a contractor’s performance and that the contractor will pay certain laborers, material suppliers, and subcontractors. That’s why surety bond underwriters analyze applicants closely. They must be certain that only those who can successfully complete a particular job receive a bond, and withhold bonding from those who cannot. To bond all contractors regardless of their abilities makes the prequalification process useless and would, in fact, increase contractor defaults.

Before issuing a bond, the surety underwriter must be fully satisfied that the contractor runs a well-managed profitable enterprise, keeps promises, deals fairly with others, and performs obligations in a timely manner. The surety underwriter also has to examine a contractor’s history of paying laborers, material suppliers, and subcontractors.

It’s essential that the contractor has the experience that matches the requirements of a specific construction project; someone who has built only driveways would not qualify for bonds on a major highway project, for example.

Surety Gives Green Light for Traffic Control System
A contract for the Virginia Department of Transportation (VDOT) called for the installation of a sophisticated traffic management system on a bridge. A subcontractor to the prime contractor was hired to design and install the system. Unfortunately, the system was seriously flawed and never performed to the specifications mandated by VDOT.Since the traffic signaling system was a major component of the contract, claims were made against the prime contractor and the performance bond.

The surety supported the contractor in an exhaustive investigation of the problem. With support from the surety, the contractor attempted to rectify the technical problems, but despite its best efforts, was unable to provide a workable traffic system. The contractor could not afford the cost of remedial work nor the cost of outright replacement. VDOT declared the contractor in default and called on the surety to correct the problems and complete the contract.

The surety promptly solicited proposals from other contractors with expertise in the very technical field of traffic management systems. Even the lowest responsive bid to replace the defective system with a workable one required hundreds of thousands of dollars in excess of the remaining contract balance. The surety honored its obligations and provided a check to VDOT for the excess completion costs and tendered an acceptable contractor to complete the contract to VDOT’s satisfaction.

In-depth Analysis of Contractor’s Business Operations

How does the surety underwriter make judgments concerning the contractor’s job experience, management characteristics, and financial health? He or she gathers and analyzes information from the contractor and various other sources. Some of the information a contractor provides the underwriter includes:

  • an organizational chart showing key employees and their responsibilities and resumes;
  • a business plan outlining growth and profit objectives, how jobs are obtained, job size and scope, bidding practices, and geographic areas in which work is performed;
  • a list of completed projects over the past five years with size, completion date, and final gross profit;
  • financial statements over the past three to five years, including accountant’s opinion page, balance sheet, income statement, expense schedule, changes in financial status, and a schedule of contracts in progress;
  • references from subcontractor s and suppliers;
  • letters of recommendation from owners, architects, and engineers;
  • evidence of a line of credit at the bank and credit history; and
  • a continuity plan.

After this information is analyzed, the surety bond company will make its decision. If the comprehensive prequalification process yields a positive conclusion, the surety underwriter then can consider each specific bond request by the contractor.

Working Together

Surety bonds are obtained through insurance agents and brokers, called producers. These producers guide their contractor clients through the prequalification process and help develop a business relationship with the surety bond company. Producers work closely to assist the contractor in preparing the necessary information and addressing any questions the surety bond company underwriter may have.

The producer also may help the contractor seek out work in order to build a track record that will assist in obtaining surety bonds for larger, more sophisticated projects.

What is the cost of this protection? The price or premium for a bond normally ranges from one to three percent of the contract price and on large projects is often less than one percent.

The premium is a fee for underwriting services and stands for:

  • a qualified contractor who is financially sound and capable;
  • project completion;
  • the surety’s expertise and assistance;
  • financial protection for subcontractors, suppliers, and laborers; and
  • financial backing of the contractor.

It’s clear that the in-depth process needed to prequalify a contractor isn’t a simple matter of using standardized formulas, filling in the blanks, and then simply stamping “approved” or “rejected” on the contractor’s bond application.

The surety bonding process involves considerable time and effort by the contractor, the producer, and the surety bond company, which makes the final judgment based on the surety underwriter’s analysis of the contractor’s managerial and financial capabilities.

Surety Keeps Contractor from Financial Ruin
The contractor, a specialist in road work, was the low bidder on a job to build a roadway through an affluent residential neighborhood whose residents were not in favor of the roadway. The completion date left little time for problems.The job had a large amount of material that had to be delivered on time and in specific sequence. The supplier was unable to meet these conditions which put the job on a downward spiral. Disputes ensued with the supplier as the project owner demanded to know how the job would be kept on schedule.

As problems escalated, the surety became involved in an advisory capacity. During the next three months, the owner declared the contractor in default three times! To compound the problem, a severe storm caused extensive damage to the work in progress. Tensions mounted and the owner wrote yet another letter of termination to the contractor.

Again the surety met with the contractor and owner and their attorneys. The owner agreed to retract the termination letter and the contractor agreed to complete the contract. A week later, the contractor informed the surety that he did not have the resources to complete the job. Additional costs of errors in materials shipments and interference from the owner had driven costs much higher than he could absorb.

The surety began financing the costs of the work and hired another contractor and a consultant to assist the bonded contractor in finishing the work.

Thanks to the surety’s establishment of a limited working line of credit, the owner is now satisfied with the completed project while the contractor survived the adverse financial situation.

Keeping Politics Out

Few government agencies awarding public works contracts have the staff, expertise, and underwriting skills possessed by professional surety bond companies. Moreover, there are differences in opinion among surety bond companies, and the competitive surety marketplace permits the contractor to look elsewhere if declined by one surety bond company. Should a government entity perform the prequalification, the contractor will either pass or fail based on a set of fixed criteria-and if rejected, there is no alternative market. What is most important is that the surety bond company is independent of the contract award system. In this way, the use of surety bonds keeps politics out of the contractor prequalification process.

Government Oversight

There are many surety bond companies that sell bonds in the United States. Some are insurance companies specializing primarily in writing surety bonds; others are large property/casualty insurance companies that have surety bond departments and provide other types of insurance coverages as well.

Project owners rely on surety bond protection in part because surety bond companies are regulated by state insurance departments. In general, surety bonds on state public works must be issued by a surety bond company licensed by the insurance department in that state. State insurance departments conduct periodic examinations of surety companies and enforce all insurance laws that pertain to surety bond companies.

In addition, the U.S. Treasury Department maintains a list of surety bond companies that it has qualified to write surety bonds required for federal construction projects. To be included on this list, a surety bond company usually must file financial and other information with the Treasury Department and pass the Department’s financial analysis. Surety bond companies that don’t meet these standards can be removed from the list. The Treasury List may be downloaded from the Internet at

Availability of Surety Bonds

Surety bonds are available to contractors of all sizes. It’s true that not every contractor has the credit history, experience, and financial capacity to obtain bonds or may not qualify for as much bonding as it might wish. Nevertheless, it’s the intent of the surety bond industry to judge all applicants for bonding on their merit regardless of size.

In fact, a number of surety bond companies specialize in marketing bonds to small contractors. In addition, several major surety bond companies have initiated programs to bond more small contractors. Many surety bond companies have designed special strategies that encourage their producers and underwriters to seek small contractor business.

Surety’s Interim Contractor Keeps Job Going Swimmingly
A contractor hired for plumbing work on the installation of a competitive-sized swimming pool and locker room facilities for a large Midwestern high school voluntarily defaulted in the early stages of the project. The contractor informed the surety late on a Friday afternoon of the default. The early plumbing work was crucial for the advanced stages of the project.The surety hired an interim contractor who started on the job the following Monday morning while competitive bids were sought for the remaining unfinished work. In just more than four weeks, the surety’s completion contractor was on the project. The project proceeded to completion within the contract time and with no additional cost to the owner.

Helping Small Contractors

Government also is playing a role in making surety bonds available. In an effort to maximize the opportunities for small contractors who want to take on bonded work, the federal government and some of the states have implemented special programs to enable surety bond companies to write bonds for small contractors who do not qualify for bonds under the companies’ normal underwriting standards.

Since the early 1970s, the Small Business Administration (SBA) has operated its Surety Bond Guarantee Program, which provides surety bond companies with partial repayment against loss stemming from bonds they would not normally provide. With the help of the SBA program, small contractors have performed more than $1 billion of contracts per year. The U.S. Department of Transportation also has devised various programs to assist disadvantaged contractors.

A number of states also have enacted bond guarantee programs for contractors. Other state departments and agencies have instituted special bonding assistance programs as well.

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