What is construction bonding?

A construction bond is a risk management tool used to protect project owners from a contractor failing to perform to the contract’s terms and conditions (performance bond) or pay for the labor and materials (payment bond). A bond constitutes a legal guarantee that the project will be completed as expected and defined by the terms of the contract and the bond. In instances where a bonded contractor (the principal) fails to perform, the bonding company is obligated to perform on their behalf. Bonding companies like Merchants work through bond agents and brokers to identify contractors that need bond capacity and perform a significant amount of underwriting and due diligence in determining the amount of bonds they will write for a contractor.

Is the business dependent upon the boom-and-bust cycles of the economy and the construction industry?

While the cycles in the construction industry certainly have an impact on the number of construction projects available to build, there is usually an increase in the percentage of contracts that require a bond during an economic downturn. Generally speaking, all public works construction requires that the contractor be bonded. While private owners may choose whether or not to bond, they may be more likely to require bonds in a downturn, therefore managing the risk of the contractor not being able to perform. The amount of Merchants’ bond premiums earned were up in 2009.

Where does the company see opportunities for growth?

The most important growth to Merchants is growth in its surplus or capital account. While it would be possible to increase the amount of premiums by writing larger bonds or bonding more contractors, it may not be prudent to do so. The real objective is to effectively manage the potential loss exposure. Merchants has grown to be the 19th-largest surety bond provider in the United States, the largest in Iowa, and has been rated “A” by A.M. Best Co., the industry’s rating service, for 52 consecutive years.

Do you listen to music in the office?

Not really in the office. I do enjoy classic rock from the ’70s and ’80s when I get the opportunity.

What were your career goals when you graduated from Iowa State? For example, did you plan to pursue a career in the construction industry?

While many accounting graduates seek employment with public accounting firms or as tax preparers, I wasn’t interested in that. I felt I could add more value to a company by working with the management teams on their core business. I’ve been very fortunate to work with companies that share my values.

What job (or life) experience has left the greatest impression on you or helped to shape the person you are today?

Even at a young age, I learned the value of a hard day’s work and recognized that to be successful at anything, you have to work hard.

Do have a favorite quote that inspires you?

Do unto others as you would have them do unto you – Jesus.

What do you do for recreation?

I enjoy “social” golfing, bike riding and following my favorite sports teams – the Cubs, Bears and the Iowa Hawkeyes.

What was the first book you read that left a lasting impression?

To Kill a Mockingbird.

Have you taken any lessons away from your work in community organizations, such as Habitat for Humanity or the Waukee Area Christian Food Pantry?

This past summer, I had the opportunity to go to Washington, D.C., on a mission trip with our church. During that trip, I had the opportunity to work with the homeless, hungry and others in need. What I took away from the trip is there is likely the need in our local communities for volunteers, and I plan to invest more of my time serving where I can.