subscribe to ENR magazine subscribe
contact us
advertise
careers industry jobs
events events
FAQ
Mcgraw Hill Construction
ENR Logo
SUBSCRIBE TODAY
& receive immediate web access
comment

Owners Shift More Financial Risk as Recovery Remains Sluggish

Text size: A A
[ Page 1 of 2 ]
----- Advertising -----

Burdened by a sluggish economic recovery, cash-strapped public and private owners are shifting greater risk onto contractors through onerous deal terms with non-traditional project responsibilities.

Contractors, as a result, must be alert to new risks, resist them whenever possible and keep costs low to stay profitable.

That was the consensus of presenters during the AGC/CFMA Construction Financial Management Conference, which took place Oct. 23-25 in Las Vegas.

The financial consequences of the risk-shifting are hitting subcontractors first since “they are furthest from the cash flow,” says Teresa Martin, vice president of Lockton Cos. LLC, Kansas City. The subs borrow more as costs rise and payments drag out, she said.

For several years, brokers have said that gradually increasing but not yet alarming surety loss ratios may mask differences based on size and market share. Top sureties with large, reliable clients and the majority of the bonded contract value report significantly lower loss ratios than smaller sureties with more small general and specialty contractor clients.

At the same time overall losses are manageable but creeping higher, sureties are unable to increase premium.

“Surety rates are down as new players join the fray and dilute prices with added capacity, helping drive profitability down 50% through June 2013” compared to the prior year, says Rick Ciullo, chief operating officer of Chubb Surety, Warren, N.J.

Meanwhile, greater reliance on technology and increased collaboration, including public private partnerships and design-build, are “clouding how insurers respond to claims,” says Danette Jones, senior vice president, Marsh Inc., Los Angeles.

The volume of teaming projects nearly tripled between 2005 and 2011, with103 jobs in excess of $1 billion in 2011 up from none six years prior.

“We’re seeing larger, more complex project that require collaboration and communication,” says Brian Perlberg, executive director, ConsensusDocs, Alexandria, Va.

Keywords:

[ Page 1 of 2 ]
----- Advertising -----
  Blogs: ENR Staff   Blogs: Other Voices  
Critical Path: ENR's editors and bloggers deliver their insights, opinions, cool-headed analysis and hot-headed rantings
Project Leads/Pulse

Gives readers a glimpse of who is planning and constructing some of the largest projects throughout the U.S. Much information for pulse is derived from McGraw-Hill Construction Dodge.

For more information on a project in Pulse that has a DR#, or for general information on Dodge products and services, please visit our Website at www.dodge.construction.com.

Information is provided on construction projects in following stages in each issue of ENR: Planning, Contracts/Bids/Proposals and Bid/Proposal Dates.

View all Project Leads/Pulse »

 Reader Comments:

Sign in to Comment

To write a comment about this story, please sign in. If this is your first time commenting on this site, you will be required to fill out a brief registration form. Your public username will be the beginning of the email address that you enter into the form (everything before the @ symbol). Other than that, none of the information that you enter will be publically displayed.

We welcome comments from all points of view. Off-topic or abusive comments, however, will be removed at the editors’ discretion.