|Contractors are required to be approved for a surety bond facility in order to bid on and to complete most public or government jobs.
Types of Contract Bonds:
1) Construction Bonds guarantee that a construction company will complete a project as promised.
2) Bid Bonds guarantee that the contractor will agree to complete the project at the bid price and are able to meet other bonding required, if the bid is accepted.
3) Performance Bonds guarantee that the contractor will perform the contract as agreed.
4) Payment Bonds guarantee that the subcontractors, labourers and suppliers, will be paid, as agreed.
Maintenance Bonds, which guarantee against defects in materials or workmanship
License or Permit Bonds, which are required to get a license or permit under state/province or local law.
Labour and Material Bonds, which guarantee payment of labour and to material suppliers.
Advantages of Bonding for Contractors
Performance Bonds allow contractors to conform to biding requirements on government and private projects. Surety is NOT insurance – it is a financial guarantee. Being bonded performance bond company and size of jobs that a contractor will have the opportunity to bid on. Providing surety bonds, in place of other forms of security (letters of credit) also allow contractors to retain their working capital.
How to get started
STEP 1: Find out what surety bonds are required for the project you are bidding on by looking in the tender documents. Some jobs require a 100% guarantee, for example, while other jobs require only 50%, for example.
STEP 2: Contact a specialty surety bond broker or agent. Your current insurance broker may have surety bond capabilities, however a specialist is highly recommended. Make sure whatever brokerage or agency you deal with is licensed in your state or province. It’s also best if they’re familiar with your specific type of industry. You’ll also want to be certain that the Surety Company that your broker or agent is recommending is federally approved.
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