July 18, 2023

Marcum New York Construction Summit: Among Surety Experts, Supply Chain and Labor Issues Remain Top of Mind

By Barbara Durante, Manager, Accounting Services

Marcum New York Construction Summit: Among Surety Experts, Supply Chain and Labor Issues Remain Top of Mind Construction

Supply chain delays are among the biggest challenges facing the construction industry, according to a recent panel of surety executives at the Marcum New York Construction Summit.

The Summit, held on May 24 in Woodbury, NY, featured insurance executives discussing the construction industry from the perspective of sureties. Panelists agreed that the pandemic introduced supply chain problems that continue even as the country recovers. Labor shortages were also named as a major issue affecting the construction industry. While construction did better than most other industries during the pandemic, many companies were hit hard and are still trying to bounce back. The supply delays and labor shortages introduced at that time may still be increasing costs, making jobs less profitable or harder to bid.

Competition also continues to play a big role in bidding for jobs. Chris Hillman from Philadelphia Insurance Companies feels “everyone is expecting competition to continue to get fiercer and fiercer, so as a surety, we are watching just like you guys are.”

Government programs such as the Payroll Protection Program and the Employee Retention Tax Credit helped many companies keep their doors open through the pandemic. The panelists talked about looking at how the company would have done without that government assistance, saying some would not have survived without this help. They added that this is something they would likely consider when determining capital requirements and whether a company could be seen as a good client.

Marcum’s National Construction Leader, Joseph Natarelli, asked the panelists how they felt about joint ventures, with the panelists describing them as a good risk mitigation tool. The general feeling was that when good companies come together and build a team you can trust, it gives a higher level of comfort.

The group spoke about how important communication is for building a strong relationship with clients. Bruce Bergstrom from Nationwide believes “the better we know our client, the more we can help.” If receivables are high, the company needs to be able to explain why. There should be a reason if money is taken out of the business. Frequent meetings and discussions will allow the surety to feel more comfortable about the company and its operations. Relationships can be strained when clients do not communicate issues as they occur.

All agreed that the sophistication of the client and their advisors is essential – for example, the company should have a CFO or a controller who is a CPA; a safety manager; and a capable financial team. Matt Curran from Sompo International said, “the quality of the CPA firm is important. A Marcum financial statement goes a long way.” They all agreed that a good CPA firm strengthens their trust in the company.

Attendees of the Summit came away with the understanding that surety groups regularly help their clients succeed and act as a resource for them as they grow. As in most aspects of business, communication is key.