Things You Should Know about Construction Bonds Before Buying Them

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Almost every construction project executed today requires an assurance of performance. The Construction Bonds ensure that the contractors are bound to deliver performance as assured under the bond. The bond itself secures the owner from lack of performance, contractor default, warranty issues, and more. The bond also secures the contractor from losing any money due to the non-commitment of the owner once the project has begun.

Who All are Parties to the Bond?

  • Principal – They are the contractors who request for the Construction Bond before they take up a project. Subcontractors can also secure these bonds for working under the primary contractor for delivering essential equipment and supplies to them.
  • Surety Company – They are the ones who issue the bond. They can be a bank or a private group that is financially strong enough to provide appropriate coverage. They pay the obligee if the contractor delays (or defaults) the project.
  • Obligee – They are the project owner who gets assurance under the bond that their project will be duly delivered. If there is a delay or default, the surety company will compensate for their loss.

How Contractors Can Benefit from Construction Bonds

  • They represent your financial standing: These bonds are issued according to your financial standing and past performances. With every bond, you will be able to build more credibility.
  • They help you land more projects: With strong credibility, you will have the opportunity to attract more contracts. You can even pick the best ones among those according to your preference.
  • They help keep disputes at bay: If there is a dispute after the project begins, the bonds keep you secured from taking any financial hit.

To know more about these bonds and more, call your nearest surety company today.

Choosing a Bid Bond – Things to Know First

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Surety Bonds secure the financial safety of an obligee when they assign a task to a contractor. Bid Bonds specifically assure that anyone who bids for the project does so in good faith. It also ensures that the contractor delivers performance as promised, along with all other bonds as applicable. The contractors on their part are assured of a higher chance to land a project of their choice. They can also submit multiple bids according to their capability.

Why Bid Bonds Are Necessary

Bid bonds bind both the obligee and contractor to the bond. The obligee has to provide an opportunity to the contractor after rolling out a project and pay according to the agreed terms. The contractor has to abide by the terms of the bond and deliver top-notch performance at an agreed price. If the contractor fails to deliver, the surety company that issued the bond has to compensate the obligee.

How the Bid Bond Cost is Calculated

Several factors determine the final value of a Bid Bond, such as:

  • The total cost of the project
  • The location where the project is to be executed
  • The owner’s profile and record
  • The contractor’s past record and financial credibility
  • Any additional add-ons that may be required during the project

Role of a Surety Company

The surety company will be responsible to issue a Bid Bond after assessing the financial capability of the contractor. They have to screen the contractor’s past record to calculate the value of the premium. A good credit score should lead to a lower premium and vice versa. The surety company itself must be financially capable to finance the project before it can issue the bond.

Want to know how you can buy a Bid Bond yourself? Then contact your nearest surety company for a quick quote and other details today.