Design Engineer/Contractor Bankruptcy: Considerations for Debtor and Creditors
The bankruptcy rate within the American construction industry has been increasing in recent years. Despite its increasing frequency, many construction industry professionals remain unaware of what a bankruptcy proceeding entails. This lack of awareness is cause for concern to both debtors and creditors. This paper, therefore, is designed to, on an overview level, lay out the factors construction debtors and creditors must consider when deciding whether to file for bankruptcy. Assuming that the decision to file for bankruptcy has been made, the paper presents an analytical overview of the bankruptcy code in terms of its operative chapters, under which a construction‐related debtor might seek relief from creditors. Since the decision to file for bankruptcy fundamentally changes business relationships, models of both Chapter 7 and 11 proceedings are included to illustrate common occurrences. It is hoped that this paper will prepare construction‐related debtors and creditors for dealing with the possibility o...
Business Failures: Liabilities of Newness, Adolescence, and Smallness
The contextual factors of a company, particularly age and size, are commonly argued to have important implications on its survival chances. The research presented in this paper explores these implications in the context of the construction industry by analyzing the age distribution of failed construction companies and computing age-specific failure probabilities over a 10-year period (1985-1994). The research findings support the liability of adolescence rather than the liability of newness concept. Computed age-specific failure probabilities reveal a pattern of failure in the U.S. construction industry where the risk of failure increases initially with increasing age, reaches a peak point and decreases thereafter as companies grow older. Youngness of a construction company, which implies lack of organization learning and lack of legitimacy, coupled with smallness, appears to be the main factor explaining this pattern. The paper finally addresses the strategic implications of increasing turbulence in the construction industry on the survival or failure of construction firms.
Surety Bonding and Owner‐Contractor Prequalification: Comparison
In the public sector, contract awards are typically made to the “lowest responsible bidder.” This term is defined by many contract‐awarding authorities as the contractor with the lowest bid who provides the bonds required by contract. Numerous professionals believe this approach is an inefficient and ineffective means to procure construction services. This paper provides a description of the competitive‐bid process along with a more complete definition of lowest responsible bidder. The definition incorporates bid responsiveness and bidder responsibility—criteria to measure both are outlined. A review of surety bonding is presented. Agencies have been dissatisfied with contractors' performance and quality of work under traditional procurement procedures. As a result, they have investigated and developed prequalification procedures. The potential role of these procedures are presented along with a comparison between surety bonding and owner contractor prequalification. A brief discussion of prequalification...