Glazier Surety Bonds can be a challenge. Find out why, how surety bond companies underwrite these bonds and tips for making bonding easier.
A Glazier is a specialty trade contractor that works with glass such as installing windows and architectural glass in buildings. Glazier Bonds are Performance Bonds, Payment Bonds, Bid Bonds and Maintenance Bonds written for these contractors.
Glazier Performance Bonds guarantee that the Glazier will complete a project according to the contract and at the contract price.
Glazier Payment Bonds guarantee that the glazier will pay subcontractors and material suppliers on the bonded contact.
Glazier Maintenance Bonds guarantee that the glazier will correct defect work for the duration of the maintenance or warranty period of the contract.
Glazier Bid Bonds guarantee that the glazier will enter into a contract for their bid price if they are the selected bidder.
Glazier Bonds can be more challenging than contract bonds for other trades. They are viewed as high risk by many surety bond companies.
One of the reasons Glazier Bonds are considered high risk is because a glazier typically comes in toward the end of a project. By the time a glazier gets to work, a project could be significantly behind schedule, over budget, etc. This creates an incentive for a glazier to share in delay damages or get squeezed by the General Contractor. Surety Bond underwriters will look for Glaziers to limit their delay damages in their contracts.
Glaziers often have to pay and order materials early in a project. However, the glazier may be unable to bill and collect for these materials until they are installed at the end of a project. This creates increased cash flow strain on the glazier. Surety Bond underwriters will want to make sure the glazier has adequest cash or borrowing ability to finance these gaps in the cash cycle.
Curtain Walls are exterior cladding that is often made of glass and metal. Curtain walls can be a great addition to any building. Unfortunately, they have had a history of being installed incorrectly and having performance issues that have led to many surety bond claims. These claims often involve water or air intrusion and can lead to broken glass panels. There have been so many bond claims against Curtain Walls, that many surety bond companies now refuse to write bonds for curtain wall contracts.
Surety Bond companies will want to see that a contractor has best practices in place for curtain walls. These include the following:
Although it adds cost, consider using a third party consultant to review shop drawings, specifications and the curtain wall manufacturer’s specifications along with the sealants that will be used. Making sure these systems work together is vital to a successful project and will help the surety bond underwriter get comfortable with the project.
Having experience with the curtain wall system is very important. Previous experience reduces mistakes and will help the bond underwriter feel more comfortable that the glazier is able to successfully install the wall without failures.
Other than a one year workmanship warranty, make sure long term warranties are passed back to the Curtain Wall Manufacturer. Additionally, it is wise to make sure the Manufacturer signs off on the successful installation at the end of the project and that the Project Owner is aware of any maintenance procedures that must be followed such as replacing the seals and gaskets.
Surety Bond underwriters like to see that glaziers have lines of credit available to borrow against. However, if these lines of credit are heavily used it could be a sign of cash flow issues. Surety underwriters like to see that the glazier pays these lines down as cash is collected and that the glazier has sufficient borrowing ability to fund future projects.
Surety Bond companies want to make sure Glaziers have proper insurance coverage in place. A falling pane of glass or a mistake in design could be devastating to the glazier’s balance sheet. Therefore, a surety bond underwriter will want to see adequate general liability insurance limits and may also ask for professional liability coverage if the glazier is involved in any design work.
Because glaziers bonds are considered high risk, glaziers need to have good financial reporting to ensure they can get surety bonds. This includes getting a quality CPA Year End Reviewed Financial Statement. It also means the glazier should be able to produce internal financial statements on a percentage of completion basis. These statements should include a Work in Progress Report that tracks projects and should include underbillings and overbillings.
Unfortunately, many glaziers do not invest in these systems. This makes getting surety bonds more difficult as the bond underwriter is less likely to trust results and the glazier’s financial position. Having quality financial statements will be worth the investment for glaziers who need bonding.
Like other Contract Bonds, Glazier Bonds cost between 0.5% – 3% of the contract amount. The cost depends on the financial strength and experience of the glazier, the type of work and the surety bond company’s filed rates for the state where the work is being performed. You can read more about these costs and how to lower them here.
Some states and jurisdictions require that Glazier be licensed and carry license bonds. These bonds guarantee that the glazier will uphold local codes and regulations required by their license. Unlike glazier contract bonds, these bonds are low risk and very easy to obtain. Usually a glazier can obtain these bonds with a simple credit check. They are also inexpensive. Many of these glazier license bonds can be purchased instantly on our State Page.
Unfortunately, fraud exists in surety bonds. This is even more prevalent in higher risk categories of surety bond business. A great example for glaziers can be found here. Failure to get a valid bond could result in the glazier having to obtain another surety bond and pay another bond premium or even get kicked off the project.
Glaziers should make sure their bond is written by a corporate surety company. They should also be listed rated A- or better by a rating agency such as A.M. Best. Check your contract as it may also require the surety bond company to be listed in the U.S. Treasury’s 570 Circular. You can read more about other ways to verify your bond and protect yourself here.
Glaziers are an important trade to any building. Unfortunately, some past surety bond losses have made this class of business high risk for many surety bond companies. However, Axcess Surety has the markets and expertise to help glaziers in all situations. Contact our Surety Bond Experts anytime. You can also visit our Learn Page and Surety Bond FAQs for education on all things surety.