Manage Quality Secrets of Bonding 154: Be A Bean Counter (The Importance of Bid Results)

It’s not sexy. Nobody has it on their business cards. It may not be in your official job description. But this article is the start of your new vocation as an official Bean Counter!A major area of surety bonding is “Contract Surety.” This refers to bid and performance bonds for construction contracts. When we set up a new account, an amount of bonding capacity is established and the individual bond requests are processed within that line. It is possible for a client to use up the full capacity of their line, then our underwriting department could consider granting an exception to support additional work.Efficient management of the line can minimize instances where an exception is needed. Here’s where the bean counting comes in.We manage bonding capacity the way a bank runs a credit line. A series of individual transactions (bonds) can equal the full capacity amount (referred to as the “aggregate”). Bank credit lines work the same way. For the bond or bank customer, it is advantageous to maximize the available credit. Prompt reporting of bid results helps accomplish this objective.


The Importance Of Reporting Bid Results Promptly

When a bid bond is approved / issued, the underwriter debits the amount against the aggregate capacity. However, the full contract amount is used, not the dollar value of the bid bond. Example: A 10% bid bond for $100,000 actually uses $1 million of aggregate capacity. Therefore, when it is known that the bid is not likely to result in a contract award, this fact should be reported so we can restore the capacity.

Detailed bid results are needed on low bids in order to process to the final bond. Example: Our guy has a low bid for $5,000,000. The second bidder was $5,400,000. Third bidder was $5,550,000. Because our bid was less than 10% below the second bidder ( the Bid Spread ), the adequacy of the contract amount is supported. If our client was more than 10% below the second bidder, there would be an additional evaluation before proceeding with a final bond.

Bid Spreads – in cases where the bid spread is excessive, it is important to have a prompt discussion with us. If there is a bid calculation error, and the contract price is inadequate, there is a limited amount of time to withdraw the bid without penalty (such as a bid bond default / claim).

Low bids may be for lesser amounts than the original bid approval. Example: We approve a bid for an estimated contract amount of $9 million, but the actual bid goes in at $8,500,000 due to last minute changes and reductions. Therefore, when the low bid results are reported, $500,000 in capacity is restored to the aggregate.

Postponements – sometimes bids are postponed at the last minute, with no immediate reschedule date. The bid approval may never be used. When a bid dies on the vine, we restore the capacity immediately.

Withdrawal – Sometimes clients decide not to bid a project after ordering the bid bond. They may have determined that the plans are unclear or unacceptable. Advise us so capacity can be restored.

If you are now sufficiently impressed with the importance of minding these small details, you may don your green eyeshade and declare yourself an Official Bean Counter. It’s not glamorous, but it is necessary for proper management of the bond account. (Actually, we think it’s glamorous!)

Artificial Intelligence and Our Humanity

We hear and read about it everywhere these days.

You hear people saying, “The future is now.”

“We have to give way to technology.”

“We’ll be better off and live better lives (maybe not even work) if we let AI do it.”

Yes, technology is here, and we are living at the dawn of the age of AI, and it’s a topic that we’ve seen and heard a lot more about this year.

I wonder what the opportunities will be for the average person. You know, the person who is not the founder of Facebook, Google or Amazon, which have placed such high barriers to entry that it will be rare for companies to break into that stratospheric league.

What’s Going to Happen with Humans?

Do you wonder what’s going to happen to the average person? AI are taking over customer service, writing, design, sales, law, and medicine. As a businessman and social entrepreneur, the reality is that if you’re looking at things in a purely bottom-line manner, using AI could make a whole lot of sense. They never get sick. They work 27/7/365. They never stop and can indeed produce more than any human can–in a lifetime. From a pure dollars and cents perspective, AI can make a lot of sense.

But then you have to wonder about the broader implications of AI, and I sense that society has not even started to get its head around the implications. If you pay even a little attention to the news, then you know that a few months ago Facebook engineers shut down and pulled the plug on AI that decided on its own to go ahead and develop a new language. It was more efficient for them to get the work done, but humans did not understand. It seems that the language was basic, but what happens if the AI had not been shut down? Would they have developed a highly sophisticated way to communicate and operate that completely excised human?

I agree that technology can be beneficial to society. I think most people would agree that we’d prefer to send a bot into a dangerous situation, say war, rather than ask our men and women to put their lives on the line. I think there’s something to be said for the rapidly expanding role of robotics in medicine. For example, the fact that we’ve started to print human organs with 3D is a significant advancement, and we have to hope that many lives will be saved.

The Deeper Issues Related to AI

My concern as I dig deeper into the issue of AI is what the implications are for the human race, and yes, that even includes how we in the philanthropic sector connect with each other and with the world we serve. As I noted in the previous article I wrote, the Partnership on AI, which is a collaborative effort between mega-companies such as Facebook, Apple, Google and leading non-profits such as UNICEF and Human Rights are trying to lead the conversation about the implications of AI in all of our lives.

If you tune in even a little bit into the conversation about AI, you know that we have to deal with many issues, including some of the following:

Safety: We don’t want to be in a situation where AI is created, and it is not obligated to protect human life.
Transparency: We had the recent situation with Facebook where they shut down AI, but who rules (government or business) when someone says “Houston, we have a problem”?
Labor and the Economy: Whose responsibility is it to train people as AI develops and what will their work functions be in light of a much more powerful AI partner? Will people even have jobs?
Society: For communities around the world, which certainly includes nonprofit and philanthropic work, what will be the impact of AI on philanthropy, education, charitable work, science, private/public partnerships, etc.

The reality seems to be apparently developing that there are few areas–if any–that AI will not touch.

Humanity’s Competitive Advantage

When I read about issues related to AI, I think of one thing–humanity. I believe we all have to get into the conversation now about the implications of AI. I’m someone who likes and values people precisely because we are imperfect. There is a lot of prose and poetry in the human condition. AI cannot love, demonstrate courage, hope, dream, feel fear, etc.

In my mind, those qualities are what makes humans so much better than AI. Our values are our competitive advantage in comparison to AI. There is something intrinsic within people (some call it a soul or spirit, others connect the scientific dots of all the elements that make up our brains, hearts, and bodies) that makes us unique, and yes, even exceptional.

We have a serious conversation that has to take place about AI, but it involves all humans, and we have to pay attention before we have a situation we did not bargain for in the age of technology.

The Path for Humanity as it Greets AI

In many ways, I hope that AI begins to break down the things that divide us and that we discover that as humans, we are all the same. We are. Take away the issues of money, race, religion, gender and everything else; we all bleed red.

We all hurt.

We all hope.

We all dream.

The way I see it, the time is now for humanity. It can be our finest hours at the dawn of a new age–provided we all get out of our own way and engage in a global dialogue about humanity in the age of AI.