A construction performance bond, also known as performance bond is a type of surety bond issued by a surety company. It is a means of assurance that the contractor will fulfill contractual obligations to the client. Below mentioned are some of the important things to know about construction performance bond:
• Many clients require contractor(s) of the construction project to purchase a performance bond before the work begins.
• Performance bonds are provided to guarantee the client(s) that the construction project will be completed as per the specifications of the contract.
• The cost of a performance bond is usually a small percentage of the full contract amount.
• A surety will perform an extensive financial and operational review of the principal before agreeing to provide a bond.
• When a surety company considers a contractor for contract performance bond, the financial statements usually must show adequate working capital, profit, cash flow and experience in similar size and scope projects.
