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.
Every construction project begins with the contractors bidding for it to win the contract. But what happens when the winning contractor backs off? That surely leads to losses for the project owner, who loses both time and money. This is why he needs some kind of assurance from the contractor so that he does not experience any loss.
Bid bonds Miami work as an assurance that the work will be completed as agreed. These bonds also help the project owner identify the contractors who have sufficient capital at their disposal to complete the work. This way, bid bonds also help to filter out all those contractors with high risk in the beginning itself.
What Makes Bid Bonds Secure
Companies that issue bid bonds keep their risk factor minimal. They ensure it by reviewing the applicant thoroughly. They assess the financial capability, as well as past performance, before setting the bid bond value. For some, the risk may be as low as 5%, for others, it can be close to 100%.
Bid bonds rarely come into play in real life. Any contractor who puts his money on the line by applying for a bid bond will never want to lose his deposit. This way, bid bonds also work as a deterrent against siphoning off any money. In the end, it’s a win-win situation for everyone.
Buy Yours from a Proven Company
A surety company issuing the bid bond has to be a proven name itself. They must understand the risks involved and should have the capital to make a payment if the same is required. With the right company at your side, you will have little to worry about. For more details, speak to your nearest surety company today.