Construction contractors: three tips for riding the wave of opportunity

After experiencing a major setback at the beginning of the COVID-19 pandemic due to the closure of construction sites, the construction sector is undergoing a major rebound for 2022. According to the Commission de la construction du Québec‘s Outlook 2022 report, we can expect 194.5 million hours worked in the construction industry this year, an unprecedented 20% increase over last year.

To stand out from the competition and be successful, contractors must find a way to deal with the challenges of scarcity. Unfortunately, there is a high probability of encountering difficulties in obtaining materials on time, meeting costs or having the necessary personnel to complete their contracts, which will ultimately impact their bottom line.

If you are a construction contractor, here are three risk management and insurance tips that will help you take full advantage of the construction boom while minimizing disruptions to your operations and revenues.


Conseils Construction


Tip 1: Ask your subcontractors for bonds

With the sharp increase in the supply of construction projects, many general contractors and their subcontractors find themselves with a very (too) large backlog. This can put them in a situation where they will have difficulty completing contracts on time.

A good way to reduce this risk for the general contractor is to require final bonds from his subcontractors. This will ensure that the subcontractors will do what is necessary to honour their obligations, since an insurance company guarantees the proper execution of the contract. This is a good way to ensure that your subcontractors’ promises will be kept and that, in the event of a subcontractor’s default, it will not cost you more to complete the contract.

In addition, this strategy may allow you to increase your bonding margin with your own surety.



Tip 2: Negotiate bank lines of credit in advance

A large order book means more sales, but also more costs to bear and therefore greater credit needs. However, it is not when the need to increase your line of credit is pressing that you are in the best position to negotiate with your banker.

It is therefore preferable to take steps straightaway to increase your line of credit. This will ensure that you have the necessary cash flow to finance the expenses related to all your contracts.



Tip 3: Plan your construction site insurance applications carefully

When you bid on a construction project, you must coordinate several price requests, including the cost of construction insurance and the “wrap up” with your broker. However, in the context of a booming construction industry, you must be ever more vigilant and allow the necessary time for your broker and the insurers to properly analyze your file. This is especially true now, when insurers, like many others, are not spared the challenges of the labour shortage.

By submitting a request to your broker early in the tendering process, you give your insurance broker the opportunity to contact more insurers and get better prices with better coverage.

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