About us
North American Construction Services, Inc. (NACS) was founded by Robert Daudt in June of 1991. Mr. Daudt had a vision into a new method of supporting surety for contractors which did not meet the underwriting requirements of the Standard Surety Marketplace. Very well educated, Mr. Daudt, a lawyer, former Bond Manager for The Fidelity and Deposit Insurance Company, CEO of Aconite Construction, and former Surety Agent for T.C. Fields and Carron & Black of Minnesota was one of the first pioneers of Escrow as a method of approving non-standard contractors for surety credit.
Michael D. Williams, formerly of The Aetna Casualty & Surety Company, and Mr. Thomas H. Fairfield, formerly of the Chubb Insurance Group, owned together a Managing General Underwriting company known as The Fairfield Company. In 1992, the two partners met with Mr. Daudt to explore a business relationship to advance the use of his concept. After just one year of writing bonds on challenged accounts using escrow, The Fairfield Company noticed a remarkable improvement in its loss ratio. It was not attributed to the economy or a change in underwriting philosophy; it was simply the control of the contract funds. Given that The Fairfield Company had underwriting authority with lucrative profit sharing contracts, this new tool impacted very positively the financial bottom line of the Company.
In 1993, Mr. Williams and Mr. Fairfield purchased NACS for use only on their own contract surety as a continued test of what they learned in controlling losses on Performance & Payment bonds. The program was a success in reducing their average loss ratio on challenged accounts from 20% down to 8%. In 1994, they rolled the program out to smaller Surety companies and their agents. The model worked well and NACS began working with over a dozen small national and regional firms and the loss ratio for the program was 0%.
From 1994 through 1998, NACS began to experiment with additional control features to expand the flexibility of the program. It concluded that a combination approach to escrow could be implemented to help the contractor achieve bonding. NACS dubbed this concept: Tools. The terminology included upfront deposits, hold backs, soft and hard seed money, and/or some combination of the tools.
NACS has concluded from its performance on over 2,000 construction projects representing well in excess of $1 billion dollars in construction, that using escrow with a 5-10% deposit yielded no losses on those construction projects. Loss history in general has been insignificant as a result of the controlling of the funds on construction projects. This is because most losses are payment in nature and funds control/escrow minimizes the contractor's ability to rob Peter to pay Paul. When a loss did occur, it was generally the result of an inadequate bid for which there is nothing escrow can do to cure the situation. When funds were deposited into the escrow as a cushion, collateral or as additional working capital, the contracting entity may not survive but there were funds to complete the project and pay the various subcontractors and vendors.
“Your Funds Are Secure with NACS”
North American Construction Services for reliable escrow services.
In the year 2000, NACS began to expand the use of the concept of funds control/escrow to other end users. NACS developed an escrow only product whereby companies that might not qualify for bonding might enter into a construction contract and the owner would have some protection and reporting over the project. While not as good as a bond, it does provide limited protection to the obligee and an array of reporting on the project that is independent of the contractor's reports. The idea began to be accepted by the financial community and banks saw the advantage of a construction escrow expert over using an unsophisticated title company arrangement. However, as the economy began to heat up and competition heightened between lenders, this requirement all but vanished. We now know the end result of the credit industry and NACS believes there is opportunity to bring this tool back to the financial community. NACS believes a combination of a bond and funds control/escrow could become a popular method of insuring banks on construction projects allowing them to free up additional capital for lending purposes. This program would also protect the public and their deposits as the oversight would quickly discover problems giving a surety time to correct them.
In 2000, NACS also discovered that funds control/escrow could be used as a modified credit enhancement tool for the supply industry. This tool could be set up and used as a bridge to close the credit gap between a manufacturer, a supplier, and an end user of the product. Typically, in this chain, the supplier is small and does not possess the credit necessary to secure enough product from the manufacturer to supply the product to the end user. There could be a multitude of reasons from poor credit to just pure lack of significant financial strength to carry out the transaction. By setting up an escrow with a major national financial institution, NACS reviews the contract chain of events, secures the payment from the end user and then can provide a payment guarantee based upon the terms and conditions contained within its escrow agreement to the manufacturer. The credit worthiness of the supplier has been shifted away to the funds control/escrow Company. This works very well in transactions that do not require the supplier to take possession of the materials or where materials may have to be modified to meet the project requirements. If funds control/escrow is not deemed to be a viable answer, NACS in conjunction with its sister company CCI Surety, Inc., can arrange a surety bond to guarantee the transaction provided an escrow is put into place and is secured. This concept has been accepted by many fortune 500 companies who are looking to meet small business and disadvantaged business requirements. Funds control/escrow alone minimizes the risk, but funds control/escrow and a bond eliminates the risk in its entirety.
Since 2000, NACS has found other ways to use its services. In certain situations NACS has worked with attorney firms to hold funds that are in dispute between their clients, maintained deposits guaranteeing employment contracts, held funds in real estate transactions and performed for surety companies on projects that have gone into claim. The company continues to pursue new ideas and expand its credit concept.
The future of funds control/escrow will continue to expand as the concept is materially needed to help and encourage small business to compete and grow. It is our hope to educate the construction industry either in building or supply of the benefits afforded by this service and to expand our outreach into the small, emerging, and minority marketplace of the construction industry.