By Angela Gibson-Shaw, President, AG & Associates
General engineering contractor Rod Edison had a dream of landing a big construction contract.
Owner of Max Out, a demolition, site work, grading, asphalt and concrete paving and masonry company, Edison had been successful in obtaining medium-sized contracts and being a subcontractor. With Los Angeles Metropolitan Transportation Authority (LA Metro), Los Angeles World Airports (LAWA) and Los Angeles Department of Water and Power (LADWP) having an excess of $200 billion in construction projects in the works, Edison’s goal was to elevate his business to the next level by subcontracting with a prime contractor on a major infrastructure project.
To protect public tax dollars, public agencies require contractors to have a performance bond equal to the cost of all contracts exceeding a certain threshold in order to bid on projects with certain public agencies. The performance bond is a way to ensure that the work will be completed. If a contractor fails to perform the work, or pay other costs associated with the contract, the insurance company furnishing the bond will guarantee the fulfillment of the contract.
“One of the main barriers to growth for small construction companies—and small businesses in general—is getting bonding and working capital,” said Lakeisha Bearden, Program Development Manager for Merriwether & Williams Insurance Services (MWIS), a risk management and insurance brokerage service company.
“Qualifying for a Payment and Performance bond is a rigorous and thorough process whereby insurance companies look for evidence of credit, capacity and character in order to extend surety credit and often may require collateral from the contractor as well. For the larger contracts, many small businesses simply don’t have the resources on their own to be eligible for bonding they need.”
MWIS has been the link between public entities seeking to expand opportunities for small and local businesses and qualified businesses for over two decades. The California-based insurance agency was recently awarded the contract with L.A. Metro to administer a Contractor Development and Bonding Program (CDBP). The CDBP assists Metro-certified Small Business Enterprise (SBE), Disadvantaged Business Enterprise (DBE) and Disabled Veterans Business Enterprise (DVBE) firms secure sufficient bonding to work on Metro construction projects
The CDBP provides contractors and subcontractors like Edison that are looking to work on Metro projects, but are unable to secure the necessary bonding required to bid on public works projects, an avenue to secure the necessary bonding.
Currently, MWIS is actively seeking veteran business owners to participate in the CDBP. L.A. Metro has established a goal of 3 percent DVBE participation on non-federally funded projects. All bidders on L.A. Metro’s non-federally funded projects must meet this participation goal and provide the DVBE’s name and dollar amount committed to that business in order to be considered for the contract award.
A firm’s participation in the CDBP will not only include assistance with obtaining or increasing bonding capacity and collateral support for bid, performance and payment bonds, but will also include technical support, education, training and contractor support. The maximum bond guarantee is up to $250,000 or 40 percent of the value of the contract, whichever is less.
As the administrator of L.A. Metro’s CDBP, MWIS provides contractor assessments, one-on-one consultations and works with contractors enrolled in the program every step of the way. Once a contractor is awarded a contract, MWIS provides a dedicated field support project manager to assist contractors with any technical issues that may arise.
In business since 2001, Edison had the experience and skills necessary to do a large construction project but lacked the required collateral to secure a bond from an insurance company. After completing the CDBP, Edison was able to increase Max Out’s bonding capacity. With each successful contract completed, he gained access to new work opportunities.
After their successful performance with construction giant Skanska, one of the largest construction companies in North America, Edison was offered a second contract on the same project, which increased the company’s project sales to $700,000. Since then, Max Out has been requested to complete additional projects, including Metro’s multibillion-dollar Regional Connector project.
“Our participation in the CDBP enabled us to network with prime contractors that we would not have otherwise been able to meet,” said Edison.
For more information on bonding eligibility and bonding programs for small businesses and disabled veterans, email MetroCDBP@imwis.com.