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...
Contractor Failure: Analysis
The possibility exists for any construction contractor to fail to filfill the contract requirements associated with a facility. Contractor failure occurs when a contractor is unable to perform his/her contractual duties, thus requiring the facility owner to invoke the contract's nonperformance clause. This paper provides aggregate contractor business failure statistics and outlines potential causes for failure. A framework to identify and quantify the associated costs is also introduced. Several case studies are presented to examine the cause and cost of failure and the means by which the facilities were completed. Alternatives available for project completion when contractor failure occurs are discussed. Recommendations to identify and monitor contractors at high risk for failure are outlined as well. This paper provides facility owners with a greater awareness of the possibility of contractor failure, how to quantify costs of contractor failure, and avoidance techniques.
Business Failure in Construction Industry
Business failure is an extremely disruptive force in the construction industry. The chance of failure for a construction company has increased over the past 10 years. In the past five years, the average age of a construction company at failure has been declining. Construction companies must always be aware of the possibility of business failure. Constant monitoring of their financial condition through the use of financial ratios is key. Overall industry indicators must also be monitored and trends analyzed to determine swings in failure probabilities. This paper investigates the effect of macroeconomic factors on business failures in the construction industry, and develops a model for evaluating and forecasting these failures.