When and why do things go wrong, badly?

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construction in toronto
Construction in Toronto

A couple of days ago, attending a General Contractors Association of Ottawa (GCAO) meeting, the guest speaker, a surety broker’s representative, read a line from his company’s newsletter.

Following several years of positive underwriting results, the Canadian Surety Industry is on track to suffer its worst year in recent memory in 2018, led by several high-profile contractor defaults, including one Ontario based general contractor whose default appears likely to go down as the largest loss in Canadian Surety history.

My journalistic ears picked up. Yes the routine association news is worthy of coverage; the new executive/directors, progress on unfair tendering practices, and the GCAO’s internal “Contractor of the Year” awards need attention, but this story is something different.

I approached the broker’s representative to ask him about failed contractor, because I hadn’t seen anything yet in the public media linking a contractor bankruptcy/insolvency to the “largest loss in Canadian Surety history”.

The broker declined to name the company. I pressed, using my journalistic skills, including offering to redact his/his company’s name from any coverage and not to use the information unless I could verify it independently. (This explains the white space about the surety broker’s identity in this narrative.) He still declined. Finally, another person on the association’s executive dropped a hint. “Have you read about the problems of a certain contractor in the (certain metropolitan) area?”

Then I guessed a potential name for the contractor. I discovered court filings and documents identifying the business’s name.

Meanwhile, a major contractors’ association (not the GCAO) reported: “Their membership lapsed and we terminated it” and the company’s head office phone number rings not-in-service. (The contractor’s website remains active, though, and there are some recent job postings for potential company employees.)

The filed insolvency court documents led me to the surety’s name, which I won’t publish here yet because while I’ve associated it through the special purpose corporations, I haven’t yet linked it to the contractor. I’ve also decided to disguise the contractor’s name in this story because of my policy to not discuss individual businesses or organizations in a negative light except in the most exceptional circumstances.

There is a possibility the contractor may rise from the ashes. And the multi-million dollar surety loss will likely be mitigated as the surety steps in, pays the subtrades and sets out other general contractors to complete jobs where the bonds have been called.

From a marketing perspective, we can see some points worthy of consideration.

  • After earlier controversies involving the contractor, the newspaper that reported on them faced a defamation lawsuit, for which the judge ruled had merit but needed to be dismissed because of recent legislative changes regarding defamation actions. (This is another reason for me not to identify the business here.)
  • The surety/bonding system results in both costs and industry access barriers, but provides a powerful safety net when things go wrong. Because of the personal liability and surety investigations, the premium rates for bonds are much lower than they would be for conventional insurance — but owners and subtrades alike have some assurance they’ll be paid eventually (and the surety has an interest in moving things along and preventing further delays, so in fact the payments can be made relatively quickly).
  • Finally and most importantly, while effective marketing can reflect and secure confidence, and thus help your business grow and survive storms, it is not the magic bullet to solve all problems. Marketing can enhance a business; it doesn’t make the business whole.
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