Surety bond underwriting contemplates two major classes of bond; commercial surety bonds and contract surety bonds. General contractors are by far the most frequent requestors of the latter which are generally purchased to guarantee the completion of construction projects. Underwriters refer to this type of work as simply “sticks and bricks”. So what if a contractor is involved in the electrical trade? Electrical projects are not sticks or bricks but for the purposes of a performance bond application, the treatment is the same. Performance bonds for electrical contractors are not very different.
We have addressed the “Three Cs” and other important considerations in previous blog postings so this brief entry will touch only on electrical contract-specific concerns. It is well-established law (a 1918 Supreme Court case) that a contractor is responsible only for completion of his or her specific project. Under normal circumstances a contractor working under a performance bond is required to “build according to the project specifications” provided by the owner (obligee) or the architect and engineers that divised the building plans. While the contractor is certainly responsible for his or her materials quality and workmanship, problems that arise from faulty or defective plans do NOT fall on the contractor’s shoulders. This appears to be a fairly strong protection of a construction G.C.
Let’s change the scenario a bit. What if instead of a building, the contractor is a master electrician engaged to complete a commercial wiring job? When the electrical plan is drawn and accepted by the project owner then from the surety underwriter’s perspective the job is just like “sticks and bricks”, unless the owner includes some specific onerous verbiage in the contract. Those unwanted provisions are “performance or efficiency guarantees”. The inclusion of these terms removes the onus of “purpose and efficient function” from the owners/planners and lands it directly on the contractor. Not cool! Taking our commercial wiring job as an example, if performance or efficiency guarantees are included then an electrical contractor is responsible not only for wiring completion but also for the system’s ability to carry and distribute specific energy loads, heat margins, etc.
Bottom line, it’s important to read project specifications and accompanying contracts carefully. Performance bonds for electrical contractors are almost impossible to obtain when non-completion guarantees are included. An insurance professional that specializes in performance bonds is an invaluable source of insight and an excellent “second set of eyes” for review of potentially problematic electrical contracts. Local professional associations of electricians are also an excellent resource for networking with contractors that may have dealt with these issues. We are familiar with the North Carolina Association of Electrical Contractors and recommend this excellent group of professionals however most states have an associate or are in a compact with a regional group.
