Running a Surety Program
In most contracting businesses, bonding is handled by whoever happens to be free. That works until the day it does not — a bid missed because the request went in late, a letter of authority that expired, $4M of aggregate locked up in jobs finished two years ago.
This is the SOP. Assign it to one person, give them a backup, and run it.
Ownership
| Role | Who | Responsibility |
|---|---|---|
| Bond administrator | Office manager or contract administrator | Day-to-day: requests, tracking, closeouts, the calendar |
| Backup | A named second person | Covers absence. Must have done it at least once. |
| Financial owner | CFO or controller | Statements, ratios, capacity strategy |
| Relationship owner | Owner or president | The annual meeting, the capacity ask, bad news |
| Producer | External | Places bonds, advocates with the underwriter |
The most common failure is that this list has one name on it and that person leaves. The register, the calendar and the account profile exist so that the job is transferable.
The records you keep
Four documents. Everything else is derived from them.
1. The surety account profile
One page, updated annually. Legal name, DBA, license number, license bond carrier and renewal date, fiscal year end, CPA, banker, insurance broker, letter of authority and its expiration, surety name, your rate tiers, all contacts on both sides.
This is the document you hand to a new hire, or to your backup on the day you are out.
2. The bond register
Every bond ever issued. Date, number, surety, obligee, project, type, contract amount, premium, commission, projected completion, closeout date, final contract amount, final premium.
This is what tells you your true aggregate consumption, what drives the closeout sweep, and what lets you reconcile premium against the surety's execution reports.
3. The document calendar
Every expiration date with reminders set. Workflow.
4. The job file structure
One structure, used identically for every bonded job, so anyone can find anything.
Bonds/
Bid Bonds/
{Owner Name}/
{Job Name}/
bid-bond.pdf
bid-results.pdf
bid-specs-or-contract.pdf
request-form.pdf
underwriter-approval.pdf
Final Bonds/
Performance & Payment/
{Owner Name}/
{Job Name}/
bond-performance.pdf
bond-payment.pdf
contract-executed.pdf
request-form.pdf
bid-results.pdf
underwriter-approval.pdf
surety-execution-report.pdf
billing/
preliminary-notices/
closeout/
Other/
{Bond Type}/
{Bond Description}/
application.pdf
bond.pdf
request-form.pdf
billing/
Financial/
Annual meeting notes/
Application and license information/
Rate tables/
Corporate financial statements/
General indemnity agreement/
Letter of authority/
Letter of credit/
Personal financial statements/
Work in progress reports/
Letters/
Bond request forms/
Broker of record/
Cover letters/
Prequalification letters/
A note if you are building software around this. Folders are a fine way to view these documents but a poor way to store them. Model each document with attributes — owner, bond, document type, effective date, expiration date — and render folder views on top. Storing the taxonomy as literal folders means a document can only live in one place, and expiration tracking becomes manual, which is how it stops happening.
Daily
- Check for new bond requests from estimating
- Respond to producer questions same day
- File anything that came in
Weekly
- Review the bid calendar for the next three weeks and confirm every bonded pursuit has a request open
- Confirm every requested bond has been received and checked
- Follow up on anything outstanding with the producer
Monthly
| Task | Detail |
|---|---|
| Update the bond register | Cost to complete on every open bond, from the WIP |
| Calculate aggregate consumption | Sum of cost to complete on bonded work |
| Check against the limit | Alert at 80% |
| Reconcile premium billed | Against the surety's execution reports |
| Update the WIP | The number everything else depends on |
| Review projected completion dates | Anything past due starts closeout |
Quarterly
| Task | Detail |
|---|---|
| Closeout sweep | Every bond past projected completion with a blank closeout date. See bond closeout. |
| Send interims to the surety | Financials and WIP, unasked |
| Run the ratios | Readiness scorecard |
| Review upcoming expirations | Next two quarters of the calendar |
| Confirm change orders reported | Anything material affects the final premium and possibly the penal sum |
Annually
| When | Task |
|---|---|
| Year end + 15 days | Engage the CPA in writing |
| Year end + 45 days | Draft financials; run the scorecard before finalizing |
| Year end + 90 days | Deliver statements to the surety |
| Year end + 90 days | Refresh personal financial statements for every indemnitor |
| Year end + 120 days | Annual surety review |
| Post-meeting | Confirm the new letter of authority; update the account profile |
| Ongoing | License renewal, license bond renewal, bank line renewal, ERISA bond recalculation |
Escalation
| Situation | Escalate to | When |
|---|---|---|
| Bond needed inside 48 hours | Producer, by phone | Immediately |
| Job above single limit | Producer | The day you decide to pursue |
| Aggregate above 80% | CFO and producer | At the threshold |
| Owner-supplied bond form with unusual terms | Producer | Same day |
| Job going badly | Owner, then producer | Immediately, before the owner writes anything |
| Cure notice or default notice received | Owner, attorney, producer | Same day. See bond claims. |
| Payment bond claim received | Owner, attorney, producer | Same day |
| Letter of authority within 60 days of expiring | CFO and producer | At the threshold |
Metrics worth tracking
| Metric | Target | Why |
|---|---|---|
| Bond requests submitted 5+ days before bid | over 90% | Late requests are the root cause of most bond problems |
| Bonds received before the deadline | 100% | Anything less is a missed bid |
| Bonds closed out within 90 days of completion | over 90% | Directly converts to available capacity |
| Aggregate consumption vs limit | under 80% | Headroom to bid |
| Premium billed vs premium calculated | Within 1% | Catches errors in both directions |
| Days from year end to statement delivery | under 90 | The clearest signal you send your surety |
Handing it over
When the bond administrator changes, the handover is:
- The surety account profile, current
- The bond register, reconciled
- The document calendar, with reminders reassigned
- An introduction to the producer, by phone, with both people on the call
- A walk through one live bond request start to finish
If those five things exist, this job is transferable in a week. If they do not, it is transferable in six months and something will go wrong in the meantime.
Start with: the bond register and the surety document calendar.