Construction Risk Management (CRM) is a proactive approach to monitoring construction projects. A bond is a reactive instrument that cannot be called into play unless, and until, a default occurs, which is the absolute last place anyone (lender, borrower, contractor, or subcontractor) wants to be.
While problems occur on all construction projects, the vast majority of the time there is no default, and, therefore, the bond is not called. So, in most cases, something (the bond) is paid for, but never used. CRM is generally one-third to one-half the cost of the bond.
CRM is appropriate for all types of projects – hospitality, multifamily, office, warehouse, retail and restaurants. It’s also good for ground-up development, tenant improvements, renovations, build-outs, or sub-division A&D. Horizontal or vertical, it really doesn’t matter. It works for SBA, USDA, HUD, or commercial real estate, it can work in all instances.