Bonding and bank issues

When we had this dispute with the Transportation Authority, we filed a major lawsuit against them for additional costs caused by unforeseen changes that the architect had not anticipated or included in the bidding documents.

This led to a 10-year legal battle that should have bankrupted us, but fortunately, it didn’t. It did have the questionable title of being the longest lawsuit in NYS history and the court of Appeals forced the Authority to finally agree to come to court.

What did happen was that the Authority filed a claim against our bond, alleging that we had abandoned the project. In response, we claimed that they had failed to provide a safe working environment for our employees.

Our bondsman at the time was preparing to retire and did a poor job of defending us and was just rolling over. We ultimately had to threaten the bonding company with legal action to prevent them from paying out the bond to the client.

The downside was that the bonding company stopped issuing bonds to us. Since much of our work required bonding, and because the construction industry tends to be like old ladies and spread news quickly, we couldn’t let anyone know we were unable to secure bonds.

As a result, we worked aggressively to pursue non-bonded projects. I did find a company willing to issue bonds, but there was a catch: we had to provide 50% of the project value in cash as collateral.

We started small, taking on smaller jobs, and as the year progressed, we reinvested and rolled those funds into larger projects, adding a bit more each time.

Within three years, we were back to bidding on projects in the $300,000 to $500,000 range.

Companies began to notice that we were still active and continuing to perform public work. Eventually, we reentered the standard bonding market, albeit with some limitations, projects could not be multi-year and were restricted in scope.

This worked for us, and those projects were all completed successfully.

Throughout this entire ordeal, our banking relationship remained strong, and the bank stood by us.

I believe part of that was due to turnover in management at the time. Our original banking manager retired, and we went through several more who never paid any attention to our dire straits before finally getting a permanent one.

By that time we were in good shape financially. I’ll admit, I was somewhat relieved that they weren’t paying too close attention during that time, but it was very stressful and I developed gout during that time.

Do you need help on financial management, vision, mission or planning than email me at bobchuckpatterson@yahoo.com

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