How is a Work-In-Progress Report Used to Determine Bonding Capacity?

Brent Headley, Surety Account Executive at Anderson & Catania Surety Services LLC, underscores the important role a WIP report plays in a contractor’s bonding capacity.

How Is The WIP Utilized To Make Management Decisions?

The main purpose of a work-in-progress (WIP) report is to analyze and track profitability on open projects. Fading project profitability can be an indicator of the quality of supervision on a project or the quality of the skilled labor on the project. Perhaps the project manager is not suitable for the project size or project scope in which he or she is supervising. The WIP can also provide insight into your team’s capabilities and capacity to handle more projects if you see continued successful results. 

How Often Should A WIP Be Produced? 

This depends entirely on the size of the contractor and the number of projects. A contractor that handles three or four projects at one time can work with a monthly WIP report. However, the contractor handling multiple contracts, perhaps as many as 20 to 100 a year, should be working with weekly WIP reports.

How Are Change Orders Tracked On A WIP? 

Approved change orders are included in the revised contract price which then increases the cost-to-complete on the project.

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(video transcript)

Number one, surety underwriters set your program based on your working capital. So, therefore, if the cost-complete on that WIP report is at a certain level, they compare that to the working capital.

The other issue is that underwriters like to know that a contractor is monitoring their job-costing on a weekly basis. So, therefore, if they receive a work-on-hand report or a WIP report three months later, they can then track the profitability of the open projects that were at year end. So, the WIP report provides, really, the backbone of the financial position as it relates to the program that the surety company offers.