The Korean Seventh-day Adventist Church and Rev. David Sul have hit a roadblock with the construction of their church. The church, which is located in Columbia, MD, was supposed to be up and running by now with 150 members. A contract was signed for the construction of the church and ended just as quickly as it started in 2008. Church officials say this botched job happened because the surety bond that was obtained didn’t fully cover the church project. Since there is no church open for worship, members of the church must occupy a sister church after other congregations in the morning are concluded. The misfortune the church has had in Maryland is an example of why individual surety bonds need more regulation when it comes to these affluent individuals backing smaller contractors who otherwise can’t obtain a bond from a licensed surety company. These wealthy “individual sureties” are pursuing legislation that would enable them to continue to guarantee construction jobs without any regulation involved. These unregulated “sureties” help smaller contractors find work, but is it worth the risks involved?

“This is the only financial transaction that I can think of that is completely unregulated,” says Minor Carter, a lobbyist for Liberty Mutual, one of the regulated, corporate surety companies that wants greater oversight for individual underwriters. “It’s the Wild West.”

The unregulated bonds no doubt help smaller contractors who can’t obtain a bond from a licensed corporate surety company to perform state work, but there are reasons that not all smaller contractors can get a licensed surety bond. Many small contractors are unable to get a bond because of a lack of experience, business financials that don’t meet surety standards, or poor credit; all of these requirements are safeguards to ensure a contractor has the ability to fulfill the contract of a specific job. The argument against regulation on contract bonds declares that increases in regulation will hurt contractors who can’t get bonds from corporate sureties which won’t let them perform state jobs; but in many cases small businesses and entities alike are being hurt because contractors that can’t handle certain workloads are being bonded anyway because of the lack of regulation.

Unregulated contract bonds definitely have their advantages and disadvantages; but the risks involved with the individual sureties more often than not dwarf the upsides. Any state or city that allows unregulated contract bonding, in this case Columbus, Maryland, needs more regulation because construction jobs are often the victim of the lack of supervision in the “Wild West” of construction bonds and projects.

A large crater in the ground with exposed grids of metal rebar was supposed to be a skate park including large bowl and pool-like concrete structures, but development on the park halted last year because the contractor “basically was not able to complete the job”, city Officials said. City attorney Michael Cosentino said San Marcos has made a claim on the performance bond while obtaining a replacement contractor to finish the job. Kristy Stark who is the public information specialist for the Capital Improvements Program, said the contractor never gave notice that the company wouldn’t be able to finish the job. Luckily, DAVCAR Engineering Services, the design engineer for the project, suggested that the city file a claim “due to the contractor’s unsatisfactory progress.” The claim was filed against the performance bond which was written by Western Surety Company.

When this contractor abandoned the skate park job, it demonstrated how important a surety bond can be regarding construction projects. If a performance bond wasn’t obtained for the job, the city would be stuck with the responsibility of funding the rest of the skate park or just be forced to forget the project altogether. Since a performance bond was in place guaranteeing the work, the surety who wrote the bond will finance the rest of the incomplete job; in turn the surety will put a claim out on the contractor who deserted the job. When a city gets stuck with the bill for an incomplete job because it wasn’t protected with a surety bond, so does the public within the Commonwealth being the city will most likely dip in to tax dollars to fund the rest of the job. The performance bond is protection not only for the obligee, which in this case is the city of San Marcos, but also the public within the city.

“The additional cost to complete the work is being borne by the bonding company, not the city. The bonding company is taking up the difference,” Cosentino said.

There are many questionable contractors and companies lurking around; it’s hard to know who will perform faithful work. A surety bond can help ease any worries when it comes to ensuring all sorts of services, including construction projects. The City of San Marcos played it safe; when in doubt, secure a bond simply because it will guarantee the services agreed upon.