𝗖𝗼𝗻𝘀𝘁𝗿𝘂𝗰𝘁𝗶𝗼𝗻 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁𝘀 𝗜𝗻𝘀𝗶𝗱𝗲𝗿

This week inside 🖊️ 𝐂𝐨𝐧𝐬𝐭𝐫𝐮𝐜𝐭𝐢𝐨𝐧 𝐂𝐨𝐧𝐭𝐫𝐚𝐜𝐭𝐬 𝐈𝐧𝐬𝐢𝐝𝐞𝐫:

🔹 An alarming emerging trend: the rise of ILOCs in place of bonds;
🔹 Change orders;
🔹 Termination for convenience clauses;
🔹 A Valentine's Day tale of heartbreak;
🔹 Upcoming events (𝙞𝙣𝙘𝙡𝙪𝙙𝙞𝙣𝙜 𝙖 𝙡𝙞𝙫𝙚 𝙚𝙫𝙚𝙣𝙩 𝙬𝙞𝙩𝙝 𝙢𝙚) you won’t want to miss;

and

🔹 Tickets for the 𝐂𝐨𝐧𝐯𝐞𝐫𝐠𝐞 𝐂𝐨𝐧𝐬𝐭𝐫𝐮𝐜𝐭𝐢𝐨𝐧 𝐒𝐮𝐦𝐦𝐢𝐭 presented by Depth Builder, Jesus (Jesse) Hernandez, and ControlQore, and sponsored by John "Goose" Dunham and Mike DiGiovanni are ON SALE NOW.

All that and more waiting for you 𝐎𝐧 𝐓𝐡𝐞 𝐈𝐧𝐬𝐢𝐝𝐞!

Each week, I'll answer a follower-submitted question or invite guest experts for a brief spotlight.

This week's thought-provoking conversation comes to us from Mark B. Logan, MPA, NIGP-CPP, CPPO, C.P.M., CPPB, A.P.P.:

Just brainstorming here (and I don't operate on this side of the house), but it may be possible to set up an escrow account and tie the release of monies tied to the ILOC to certain benchmarks or milestones. What do you think, Megan Shapiro, Esq.?

Although I've never seen an escrow account used this way, I am intrigued by this possible alternative to bonds and ILOCs. I can certainly see some benefits to this.

Do you have any experience with using escrow accounts this way? Let's keep the conversation going. Share in the comments!⤵️

Have a clause you’re struggling with or an insight you want to share? Let me know, and I’ll tackle it in a future Q&A!

Mark B. Logan, MPA, NIGP-CPP, CPPO, C.P.M., CPPB, A.P.P.

Procurement Leader & SME | Content Creator | Optimistic Stoic

Thanks for the shoutout, Megan! I’m glad you found the escrow account idea intriguing.

From my side of the house, whenever I see ILOCs used in lieu of bonds, it can raise some red flags. Not always—but it’s worth looking into.

It can mean the company is over-leveraged on their bonding capacity, or there could be other significant issues preventing them from getting bonded by a surety... things like lawsuits, above-industry mod rates, etc.

Sometimes it’s just about saving money on premiums, but again, I don’t work on this side of the house. Just my real-world "in the trenches" experience from a practitioner with over 25 years in public works, not a surety expert or construction attorney.

While it’s not a typical solution, like you said, "thinking outside the box" and getting creative can sometimes uncover alternative ways to protect companies... especially the subs in this case.

Curious to hear from others as well to see if they implemented something similar, or what alternative strategies others have taken to protect themselves