Contract surety bonding protects a project owner from financial loss should the bonded contractor fail to fulfill the contract in accordance with it's terms and conditions. Performance bonds are usually packaged with payment bonds. Keeping up with the legal cases and construction sector-specific happenings is imperative. Visit our general contractor news feed.
Is a bond which provides financial assurance that the bid has been submitted in good faith, that a contractor will enter into a contract at the amount bid, and will provide the appropriate performance and payment bonds. These bonds are used by obligees (project owners) to pre-qualify contractors submitting proposals. Some project owners may in lieu of a bid or tender bond request a letter of bondability (statement bond bonding limits) from a contractor.
A performance bond guarantees performance of the terms of a contract. These bonds frequently incorporate payment bonds (labor and materials) and maintenance bonds. Bonding ultimately aims to protect the project owner from financial loss should the contractor fail to perform the contract in accordance with its terms and conditions.
A payment bond covers payment of subcontractors, laborers, and materials suppliers associated with the project. Payment bonds are issued for the protection of those supplying labor or materials to a particular bonded project.
A maintenance bond guarantee upkeep (maintenance) of the completed project for a specified period of time after completion. These bonds protection from defective workmanship and/or materials.
A supply bond, also referred to as a material supply bond is essentially a performance bond except rather than guaranteeing completion of a particular project the obligation is for the supplier to fulfill a materials procurement agreement at the price offered for the term of the agreement.
A subdivision bond, also referred to as a site improvement bond, completion bond or plat bond, is essentially a performance bond however there are some key differences. We have a broad appetite for developer's surety bonds in all states and territories!
A “contractor’s bond” is one of the most common surety bond needs in the North American market but what does that term mean? MANY different parties may require a contractor to provide a "bond" that is not a contract performance obligation. License & Permit Bonds (L&P) are required by states and municipalities to issue a contractor license. Third party fidelity bonds also known as dishonesty bonds, insure dishonesty losses resulting from the contractor and his or her employees’ actions while providing services on a client’s premises (this is what a party refers to when he says, "We are bonded.").
A statement of bonding limits or "bondability letter" is a simple declaration of a surety underwriter that a particular contractor qualifies for a specific level of access to contract sureyt bond capacity. These can be binding or non-binding.
In response to social distancing requirements as a result of COVID-19, theFederal Acquisition Regulation (FAR) and General Services Acquisition Regulation (GSAR) authorizes surety companies to use electronic signatures in lieu of manual signatures and eliminates the requirement for any seals on surety bonds.
These performance bonds, like those for traditional "sticks and bricks" projects, guarantee that you will fulfill your contractual obligations as per the terms of your contract. Generally, this program is focused on manufacturers, wholesalers and retailers (supply contractors) who sell and install specific products or provide specific services.
Qualifying for and obtaining surety bonds is like applying for a significant unsecured line of credit. If you have never accomplished bonded work or participated in preparing a contract surety bond submission, we really, REAAAAALLY recommend that you read this publication of the Associated General Contractors of America and National Association of Surety Bond Producers.
the "Basic Bond Book"
The following link contains a very short publication of the Surety Information Office (SIO) which clearly explains the bonding process in plain language.
How to Obtain Surety Bonds
The American Subcontractors Association in collaboration with the National Association of Surety Bond Producers and the Surety and Fidelity Association of America, have produced the following compendium of P3 laws and current bonding requirements. As the popularity of public private partnerships grows, these laws and the performance bond requirements will change.
Public-Private Partnership Laws in the States
U.S. Dept. of Transportation P3 Procurement Guide
What is a Public-Private Partnership?
Visit our performance bond site for forms and educational materials about contract surety.
In efforts to support the growth of emerging contractors with limited experience and financial strength, and to increase the opportunities available to those contractors in the federal sector the Small Business Administration created the SBA Surety Bond Guarantee (SBG) program.