2021 promises to be banner year for Florida’s transportation and infrastructure industry with the State Transportation Work Program. This program includes vital funding to increase infrastructure capacity, new highway construction, bridge repairs, and seaport, aviation, and transit program improvements. As a result, the need for obtaining Surety Bonds will be greater than ever.
Surety Bonds perform an essential role in the construction industry. A Surety Bond is a three-way contract between the surety (the company providing the bond), the principal (the contractor) and the obligee (the project owner). The principal usually applies for the Surety Bond with the surety and it is to protect the obligee’s interest.
A Surety Bond is simply a three-party agreement or contract where the first party, the surety, guarantees the performance of the second party, the principal (contractor), if they default on their obligation to the third party, the obligee (project owner).
The reason Surety Bonds work so well is simple. They help to take the risk out of a risky business. Surety Bonds are designed to protect your interest from the actions of a third party.
Types of Surety Bonds.
There are variety of Surety Bond types designed to meet your needs. In fact, almost any contract or obligation can be bonded. The four most common types of Surety Bonds include Contract Surety Bonds, Commercial Surety Bonds, Court Surety Bonds, and Fidelity Surety Bonds. But, for this article, we will focus on the most common bonds used for road and highway work – Contract Surety Bonds.
Contract Surety Bonds
In the construction industry, the most common bond types are Contract Surety Bonds. They include Bid Bonds, Performance Bonds, and Payment Bonds. All are needed for different purposes to ensure that the interests of the obligee are protected, especially if the principal fails to meet the terms of their contract.
Bid Bonds financially protect an obligee if the bidder awarded the contract fails to sign the contract and fails to provide the essential Performance and Payment Bonds.
Performance Bonds, on the other hand, are put in place to protect the obligee from monetary loss if the contractor fails to deliver the job according to their agreement.
Payment Bonds are there to guarantee that the contractor is going to pay the workers, subcontractors, and material suppliers involved in the project.
A Contract Surety Bond protects the project owner by guaranteeing that the contractor will follow the specifications and perform the work laid out in the construction contract. It also ensures that certain labor, materials suppliers, and subcontractors will be paid.
What Do You Need for a Surety Bond?
Before you apply for a Surety Bond in Florida, make sure that all your documents are in order so that you can expedite the whole process. Essential documents include:
Financial Records: Surety companies will ask for both personal and business records. For businesses with less than $20 million in sales, you will need to provide financial statements for the last year and for the interim period in this year, most recent personal and corporate tax returns, financial records of majority shareholders, and a bank reference letter. Companies with more than $20 million in sales need to show their audited financial records.
Resumes: Some surety companies may ask for resumes of key personnel. Make sure to highlight any relevant experience.
WIP Form: WIP stands for “Work in Progress” form. Ask your surety company for the relevant form. This details all the projects you have completed recently, ongoing work, and any outstanding surety.
Insurance: Some surety companies may insist on work insurance to see that there are no uninsured liabilities.
References: Companies issuing Surety Bonds in Florida will ask for references from associated parties, such as past clients, suppliers and so on. The references are an indication of other’s trust in your ability.
Apply for a Surety Bond Online:
Surety Bonds are usually required for contractors to work on projects. Without it, a contractor might not be able to work with project owners, workers, and material suppliers. These are the people who play a significant role in the successful completion of contracted jobs. Surety Bonds protect project owners if the principal does not fulfill their obligations per the terms of their agreement.
With a new administration also proposing to make “historic investments in infrastructure”, there should be plenty of new projects in 2021 and numerous contractors bidding on these projects. With Surety Bonds usually required to even start the bidding process, you must find a reputable Surety Bond company to apply with – one that has a strong reputation and is an industry leader. Before choosing a surety company, make sure they have the available resources to support the project you are bidding on.
But obtaining a Surety Bond can be a grueling, time intensive process. That’s why more companies turn to America’s number one provider of Surety Bonds, Nielson, Hoover & Company. To learn more, call 305.722.2673.