In the current recession, private construction activity has fallen off. Meanwhile, federal stimulus money increases construction in the public sector. Public procurement may be the only game in town. Public projects often require or promote minority business participation. Minority business enterprises often lack the experience or financial strength of more traditional players. Contractors and suppliers must be creative and flexible to capture public work and increase minority participation, while minimizing the chance of default and avoiding insolvency issues. What kind of arrangements can contractors and suppliers make that will be recognized as legitimate minority participation, but still provide the security necessary for manufacturers and suppliers to supply materials at their best pricing? We will explore the role of payment bonds, joint check agreements, guarantees, assignments and escrow arrangements in public projects.

Joint Check Agreements

There is no such thing as a "standard" joint check agreement. These documents vary widely in their wording and the protection they offer a material supplier on a construction project. A credit manager must be able to evaluate the security offered and suggest changes that will better protect company assets. The most common joint check agreements state only that a general contractor will write any check jointly. This only helps if a check is ever written and offers no protection if the customer defaults on the project. Some agreements provide no recourse against a general contractor and even contain a waiver of your lien and bond rights. What if the customer disappears, goes out of business or refuses to endorse a check? What if there is a disagreement about the amount owed the material supplier? Learn how to add solutions to these problems and provide actual security in a joint check agreement.