By Ian Kormos, EHD
Starting a construction or renovation project is a big moment. Whether you’re building a new school, upgrading a municipal facility, or tackling a major infrastructure improvement, you’re making one of the largest financial commitments your organization will ever face.
Budgets are tight. Timelines are firm. And the public is paying attention.
The good news? Many of the costly surprises that derail public construction projects are completely avoidable with the right planning. Before the first shovel hits the ground, here are five critical steps every public entity should take to protect its investment and keep the project on track.
1. Use Contracts to Transfer Risk Away from Your Organization
Contracts are one of the most powerful and often overlooked risk management tools available to public entities. At their core, well-written contracts help ensure that responsibility for specific risks sits with the parties best equipped to manage them: contractors, architects, engineers, and subcontractors.
When something goes wrong on a job site (and eventually, something usually does), clear contract language removes uncertainty about who is responsible. Without it, liability often falls back on the owner, the municipality or school district.
Because state laws can limit what risks can be transferred, having an experienced construction attorney reviewing all contracts before they’re signed is critical. It’s far easier to address these issues on paper than in court.
2. Don’t Set Insurance Requirements, Set the Right Insurance Requirements
Requiring contractors to carry insurance is a good start, but it’s not enough on its own. The details matter. Vague, outdated, or “cut-and-paste” insurance requirements can leave dangerous gaps that only become apparent when a claim occurs.
Before bids are released, insurance requirements should be reviewed and updated by an advisor who understands public construction risk. Coverage types, limits, endorsements, and policy terms should reflect the size, scope, and complexity of the project, not what worked five or ten years ago.
Equally important: certificates of insurance and specific policy endorsements should be collected and verified before work begins, not after a problem arises.
3. Protect the Owner with the Right Coverage
Contractor insurance protects contractors. It does not fully protect the owner.
Municipalities and school districts have unique exposures during construction that require their own coverage, most notably Builder’s Risk insurance. This policy protects the project itself against losses from events like fire, wind, theft, vandalism, collapse, and damage to materials, including those in transit or temporarily stored off-site.
Builder’s Risk fills a critical gap that neither a contractor’s liability policy nor an owner’s existing property insurance covers during construction.
We strongly recommend that the owner, not the contractor, purchase and control the Builder’s Risk policy. Doing so helps prevent coverage gaps, ensures the policy is structured around the owner’s interests, and allows direct communication with the insurer if a loss occurs. The policy should reflect the full completed value of the project, including materials, labor, and applicable soft costs.
4. Build the Right Team Before the Project Starts
Successful construction projects depend on more than a capable contractor. For public entities, risk management starts with assembling the right advisory team before design or bidding begins.
This typically includes an insurance broker experienced in public entity construction, a construction attorney familiar with public procurement, architects and engineers who understand both design and risk implications, a construction manager representing the owner’s interests, and financial or legal advisors to oversee bonding and compliance requirements.
When these professionals collaborate early, risk management becomes proactive instead of reactive. Insurance requirements are built into bid documents correctly. Contracts reflect appropriate indemnification and insurance provisions. Coverage is secured on time. Potential problems are identified early, when they are far less expensive to fix.
Investing in the right upfront team is one of the most cost-effective decisions a municipality or school district can make.
5. Present Your Project Clearly to the Insurance Marketplace
Many public entities don’t realize that how a project is presented to insurers can directly affect both coverage terms and cost. Insurance underwriters rely on the information they receive to evaluate risk, and a well-organized, detailed submission signals a professionally managed project.
Incomplete or rushed submissions, on the other hand, can result in limited carrier interest, restrictive coverage, or higher premiums.
An experienced broker should help prepare a submission that clearly outlines the project scope, timeline, total value, qualifications of the contractor and design team, safety protocols, and contractual risk transfer approach. Starting this process early, ideally before bids are finalized allows coverage to be secured efficiently once a contractor is selected.
The Bottom Line
Public construction projects represent major investments in the communities they serve. By focusing on these five steps: strong contracts, clear insurance requirements, owner-controlled coverage, the right advisory team, and thoughtful presentation to insurers, municipalities and school districts can significantly reduce uncertainty and financial risk.
Construction projects will always be complex, but the risks involved are well understood and manageable with proper planning. Organizations that take a proactive, informed approach are far better positioned to deliver projects on time, within budget, and without unexpected financial setbacks, protecting both public funds and public trust.
