The labor shortage in the U.S. has created tremendous stress on contractors, particularly those in high-growth areas or with large projects that require a fast turnaround.  With many economists predicting continued labor shortfalls over the next few years, the construction market might only be seeing the tip of the iceberg on this issue.

Accurately predicting the size of a construction crew is central to a contractor’s ability to price a given project. Unpredictability of worker availability combined with significant wage increases in many industry sectors often lead to higher bids meant to help mitigate the contractor’s risk that a job won’t be completed on time and within budget.

Contractors who make productivity and efficiency gains with their workers should have advantages over their peers in terms of bid competitiveness, profitability and project completion. However, they’re still competing with other non-construction labor intensive service industries. To gain a competitive hiring advantage, some labor intensive industries, particularly those with seasonal needs, are building affordable, local, multi-tenant housing to attract workers.

Fortunately, surety bonds on private work are becoming more routine. Significantly more private project owners now require a contractor to provide a contract bond to protect construction projects against default and to ensure contractual obligations are met.

Decisions on pricing these bonds — and whether to even issue them — are made by contract surety bond underwriters. Their routine considerations of labor issues and concerns are amplified at a time when worker availability is a struggle. Large, labor intensive projects and jobs with shorter than typical completion times regularly attract the attention of surety underwriters, but especially in today’s market.

A surety underwriter typically tracks how a project proceeds, but in today’s market, they also closely follow the labor situations of contractors who hold their contract surety bonds. This helps them to better understand and monitor staffing for these larger and quick turnaround projects.

Fortunately, these labor issues have not significantly increased the number of contract surety claims industrywide. In claims situations though, the current labor shortage has increased the cost for surety bond companies to complete the remaining work on projects.

Learn more about contract surety bonds offered by Westfield.

source: George Siegler, Regional Surety Leader, Westfield