It’s a Thursday in March when the call comes in. Here’s a version most surety brokers will recognise.

The client is a family-owned civil contractor with 22 years behind it. It has never walked off a job. Its lead superintendent has been there since the first project, and owners keep inviting it back to bid. Now it wants to go after a $14 million wastewater upgrade, the biggest job in its history.

The broker pulls the file together: two years of reviewed statements, last quarter’s WIP schedule, a bank reference. The answer comes back cautious. A wet fall pushed two jobs behind and dented margins on paper, and the year-end statements are already months old. The bonding program stays where it is.

Nothing in the file was wrong. It just couldn’t show what everyone who had worked with this contractor already knew.

Every contractor has a WIP report. Not every contractor has a track record anyone can see.

The three C’s

Surety underwriting has long rested on three C’s:

  • Character: integrity, reputation, relationships, and how the owners behave when a job gets hard.
  • Capital: the balance sheet, working capital and the financial cushion behind the work.
  • Capacity: how much work the contractor can carry, judged from backlog, WIP and existing commitments.

They’ve served the industry well, and underwriters, brokers and construction CPAs have built deep expertise around them. The problem isn’t that the three C’s are wrong. It’s that they’re built mostly from documents: financial statements, WIP schedules, references and conversations.

By the industry’s own numbers, that discipline works. U.S. sureties have posted net profit margins above 30% in each of the 11 years from 2014 to 2024, ahead of every other major commercial insurance line (AM Best).

What the paperwork can’t show

A WIP schedule is a snapshot. For each job it gives a contract value, costs to date, an estimated cost to complete and a percent complete, usually as of a period end and often weeks old by the time anyone reads it.

The financial statements are older still. Balance sheets and income statements are often reviewed months after the dates they describe, which is why underwriters lean on WIP schedules for anything current (IRMI).

That’s useful, but it’s one number per job, and it’s the contractor’s own estimate. It can’t show:

  • whether the schedule is holding or quietly slipping
  • how change orders are trending, and whether they’re getting approved
  • whether crews and subs are stretched across too many jobs
  • the difference between a contractor who consistently lands complex work and one who simply reports well

Underwriters fill that gap with judgment and experience. When the evidence is thin, the safe move is caution.

That caution isn’t paranoia. Construction is where businesses fail most often:

  • 15.5%In 2025, construction accounted for 742 of Canada’s business insolvencies, 15.5% of the total and more than any other sector (CAIRP, via Lexpert).
  • 24%In the U.S., construction has the steepest first-year drop of any major industry. Of construction establishments opened in 2013, 24% were gone within a year (BLS).
  • 70%Pressure runs down the chain too. In AGC and FMI’s 2024 risk survey, 70% of contractor risk managers reported more subcontractor distress or default than a year earlier (AGC–FMI).

But caution built on thin evidence lands on everyone, including the contractors who have earned more. The answer isn’t less caution. It’s better evidence.

The fourth C: capability

Capability is what a contractor can actually deliver, shown by evidence from how their jobs really go.

It looks at execution rather than reporting: progress against schedule, how changes are managed, how the contractor handles the type and size of work they’re bidding, and how consistent all of that is over time. Built up job after job, it becomes a track record you can see, not just one you describe.

Capability sits beside the other three, not above them. Character tells you who the contractor is, capital what they have, and capacity how much they can take on. Capability tells you whether they can deliver the next job, based on how they delivered the last ones.

What it changes for contractors and brokers

For contractors, capability is credit for the work itself. A firm that delivers well finally has something to show for it beyond references and a clean set of statements. That can support the case for more bonding capacity, better terms or a stretch project.

For brokers, it means a stronger submission. Instead of “trust me, they’re good,” a broker can put evidence in front of the carrier, which makes the conversation shorter and the client easier to place.

And when a job does come under pressure, evidence works in the contractor’s favour too. Caught early, a slipping schedule becomes a conversation with the surety on the contractor’s terms, not a surprise in next quarter’s WIP.

What the fourth C isn’t

Capability isn’t surveillance, and it isn’t a score that replaces anyone’s judgment.

  • The contractor controls what’s shared, and with whom. It’s their record.
  • Underwriters still make the call. Better evidence informs the decision. It doesn’t make it.
  • It doesn’t raise anyone’s limits on its own. It puts the same, better picture in front of everyone at the table.

Where we go from here

At Surely, we think capability is the missing piece in how construction gets bonded and financed. We’re testing that idea now with a small group of brokers, contractors, sureties and lenders, on real jobs and real decisions.

If you’re a broker with clients who deserve more credit than their paperwork gives them, or a contractor who wants your track record to count, we’d like to hear from you.