All across Canada, various levels of governments are re-evaluating their bonding policies when it comes to construction contracts. Bonding is a guarantee by the surety company that a contractor will complete the project for the project owner as per the contract.

In the Northwest Territories and Nunavut governments have unique programs in response to our unique challenges, however these programs are also under review. If these changes to bonding policies are implemented contractors may have to acquire bonding on projects they may have not needed in the past.

With or without these changes, contractors are much more attractive to customers when they have the ability to obtain bonding on their projects. Bonding always provides a certain level of comfort to the project owner.

Ron Dennill is the manager for the Northern Communities Insurance Program, a program of the Northwest Territories Association of Communities. He remarks that "surety companies, who are usually insurance companies, look for the three C's, character, capacity and cash. Cash or working capital as well as equity are often the reason applicants are not able to secure a surety bond facility."

Mr. Dennill also recommends contractors prepare early even though they may not necessarily need surety bonding right away. Getting your company in a good financial position will be needed to obtain bonding. A general rule thumb for surety bonding is that a contractor will require about a 10 to 1 ratio or working capital and equity to the amount of work on hand. This means for a contractor who would have $2,000,000 of work on the go at one time, whether it is bonded or not, will generally need a minimum working capital or equity of $200,000 within the company.

Norland Insurance has been a long time supporting member of the NWT Construction Association. According to Shirley Fontaine the Managing Partner of Norland Insurance "An application process to acquire bonding is not a complicated process but is detailed. Each applicant is different and each situation is different, therefore contractors should work closely with their potential surety provider to ensure the right package is developed."

Surety underwriters in Canada have indeed been hit fairly hard this past couple of years with escalating bond losses. This has resulted in tighter underwriting requirements for surety bonding they provide to contractors. Contractors can prepare to acquire bonding by preparing their finances, begin talking to a insurance broker to become knowledge with the application process and to begin preparing internal policies.