A contractor can have a profitable order book and still face a funding gap. Materials, subcontractors and payroll are paid against dates that do not necessarily follow the employer’s certification cycle. Retentions and disputed variations widen that gap.
The useful underwriting view is project by project: contract value, work certified, cash collected, cost incurred and cost to complete. A historic gross margin is informative, but it does not demonstrate that the remaining work can be financed at today’s contractual price.
The bond pipeline should then be layered over that forecast. Several modest awards starting together can require more liquidity and guarantee capacity than a larger project delivered in sequence. Guarantees support performance obligations; they do not provide the operating cash needed to perform them.
An effective submission explains the downside as well as the plan. It identifies which receipts are contractual, which depend on settling a variation and which facilities are committed. This allows the broker and underwriter to discuss a workable facility around the programme of work.
Where this goes next
