Getting good performance out of a contractor working on a project is very tricky. That’s why there are Surety Bonds that keep their performance in check and penalize the contractor if there is any delay or default. When it comes to the construction business, there are more specific bonds that guarantee project owners of obtaining a satisfactory performance. Contract surety bonds are one such bond type that assures the obligee (project owner) of good performance as per the agreed terms and conditions in the contract. It also lists the details for paying other parties that are working on the project, such as subcontractors, laborers, material suppliers, etc.
Why You Can Trust Contract Surety Bonds
The primary goal of Contract Surety Bonds is to bind the contractor to his duties on the project. Surety companies issuing the bond spend a lot of time and resources to check the contractor’s credibility before they issue them the bond. If there is a red on the contractor’s record, they don’t get the bond. If there is an acceptable reason for their delay or default, they get the bond, but with a lower bond value. Project owners can learn all about it through the bond itself.
Aspects that Surety Companies Screen
- Financial Capability: This covers their annual financial statements, cash flow, working capital, and net worth. Other factors such as investment strategies, running projects, credit score, and cost control strategies are also considered.
- Performance Ability: Past performance of earlier projects comes into the picture here. Other factors such as access to required equipment, qualified personnel, workload management, and management and organizational chart also play a vital role.
- Industry Reputation: This covers the contractor’s reputation with their subcontractors, suppliers, previous project owners, as well as lenders.
Want to learn more about how to secure a surety bond in the most secure way? Then contact the leading surety bond agency operating in your region today.