Construction Surety Bonding

Abstract

The qualification process in the construction bond business is very complicated, labor-intensive, and time-consuming. The construction bond underwriting processes contain subjective judgments that require human involvement to reach decisions. Thus, underwriting evaluations are bound to be very difficult, ambiguous, and have potentially great losses. This paper identifies and classifies quantitative and qualitative risk factors impacting construction bond underwriting, to improve the quality of the evaluation analysis and to reduce the highly unstructured environment and the subjectivity of the bond evaluation in underwriting. The methodology provides a systematic information analysis for the heuristic knowledge of the construction surety bonds underwriting process, provides better control over the risk assessment process by providing independent judgments for the major decision factors and an overall judgment for the final contractor's risk assessment decision, and reduces the time and effort required of the current evaluation process to reach a certain decision and to simplify the complicated nature of this process.