why do the contractors fail (2)

8/3/2019 Why Do the Contractors Fail (2)

1/25

ONG CHOON KIANAA090156

CHOW YIP MUMAA090026

WOON WAI JACKAA090192

CHIN TIAN XIANAA090023

WEE BING NAN

AA090188


2/25

1. Surety bonds2. Events that can lead to fail3. Warning signs that a

contractor is in trouble4. Qualities of a solid contractor


3/25

1. Surety Bond Construction is a business that will faces manychallenging conditions Contractor that does not prepared or capableof meeting the demands is absolutely fail Surety bond can lower the risk of contractorfailure Gives advantages to clientwith requiring performancebonds or performance

guarantee sum


4/25

Surety provide financial security andconstruction assurance to project owner

Contractor is verified that capable. Surety company is well to analyze and manageconstruction risks The surety will verify the contractor`s ability toperform the contract and fulfill its financialobligations

It also indicate that the contractor have a well-managed, profitable enterprise, deals fairly andperforms obligations as agreed


5/25

2. Events that can lead to fail contractor failure is always caused bymultiple reasons The most common factors are

Unrealistic growthperformance issuesCharacter issuesAccounting issuesManagement issues


6/25

Unrealistic growthI. Change in type of work performedII. Expansion into a new geographic areaIII. Significant increase in the size of

individual projectsIV. Rapid or ever expansion


7/25

Character issuesI. Contractor retires, dies, sell companyII. changing leadership or focusIII. No ownership or management

transition plan to ensure continuity inthe eventIV. DeathV. disability


8/25

Performance issuesI. Inexperience in new scope or types of

workII. Personnel do not

have adequatetraining orexperience

III. Insufficientpersonnel


9/25

Accounting issuesI. Inadequate cost and project

management systemsII. Estimating or procurement problems

III. Lack of adequate insuranceIV. Improper accounting practices


10/25


11/25

Other factorsI. Economic down-turn and high

inflationII. Weather delaysIII. Poor site conditionsIV. Improper building plansV. Labor difficultiesVI. Lack of skilled workerVII. Material and equipment shortagesVIII.Owner not able to pay

IX. Onerous contract terms


12/25

3.Warning sign that a contractor is introuble

Ineffective financial managementsystem

Bank lines of credit constantly borrowedto their limits

Poor estimating

Poor project managementNo comprehensive business planCommunication problems


13/25

Ineffective financial managementsystem

I. Inability to forecast cash flowII. Cash flow is tight

III. Receivables are turning over too slowIV. Vendors are demanding cash on

delivery for supplies and materialsV. Bills are past dueVI. Profit fade


14/25

Bank lines of credit constantly borrowedto their limits

I. All credit fully securedII. Credit lines not being renewed


15/25

Poor estimatingI. Revenue and margins decrease over

timeII. Continued operating losses

III. Loss or reduction of bonding capacityIV. Bidding jobs too low


16/25

Poor project managementI. Inadequate supervisionII. Inability to administer collect changeordersIII. Project not completed on timeIV. One or more contracts have claimV. Company is continually involved in

litigationVI. Increase in backlog without adequate

project management resourcesVII. Lead time to prepare bids too short


17/25

No comprehensive business planI. Contingency plans are not developedII. Company does not have a goals,

objectives and proper planning

III. Fails to adhere to the business plan


18/25

Communication problemsI. Disputes between contractor and

ownerII. Poor communication from field to

managementIII. Lead to not well construction and

rejection from client


19/25

4. Qualities of a solid contractorGood contractor should have thesecharacteristic,o Organizationo

Financeo Marketingo Project controlo Planning


20/25

o OrganizationI. Formal and on-the-job training for all levels of

employeesII. Logical, incentive-based compensation planIII. Tenure for proven field superintendents and

internal promotion when possible

IV. Depth at all levels of the organizationV. Succession planningVI. Up-to-date, distributed organization chart

VII. Culture of loyalty, ownership, and urgencyVIII. Visionary, inspirational leadershipIX. Low turnover


21/25

o FinanceI. Solid management of cash flow and

overheadII. Profit-focused company

III. Timely payment of billsIV. Management of debtV. Reasonable

growth withoutoverextendingresources


22/25

o MarketingI. Superior estimating skills and systems

to manage costsII. Satisfied customers

III. Well-defined market and 1-3 yeargrowth planIV. Company culture where everyone is a

great salesperson


23/25

o Project controlI. Closely managed projects with early

warning systems to catch potentialproblems

II. Litigation avoidanceIII. Productive field

managers trained

to improveprocesses


24/25

o PlanningI. Disaster preparednessII. Adequate life insurance coverageIII. Shareholders agreements detailing

buy-sell agreement for multipleshareholders

IV. Only qualified and interested familymembers in management

V. Detailed business planVI. Strengths, weaknesses, opportunities

and threats


25/25

why do the contractors fail (2)

Documents