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A performance bond, sometimes referred to as a contract bond, is a surety bond that is issued to a contractor before the start of a construction project that guarantees the contractor will complete the obligations of the project to the satisfaction of the owner of the project as agreed to in the initial contract. The performance bond is meant to protect both parties involved in the project. The Principal, usually the general contractor of the project, is often required to obtain a performance bond to ensure that the project is completed within the framework and timeline agreed upon, and if failure to do so, the obligee of the principal can file a claim against the performance to the surety. The Principal is then required to repay any money that the surety paid out on behalf of the claim made. All claims should be worked out and paid for as soon as possible as to not risk losing licenses, and business in the future. Claims against a surety bond can be detrimental for a contractor.
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Typically, the contractor who wins the bid is required to respond within 10 days or as is required in the bid specifications in order to secure the project. In order to guarantee the contract will be completed as promised, and to protect the taxpayers’ dollars, city, state, or federal regulations will often require that the contract is bonded.
At this point, the contractor will need to contact the surety insurance agency of their choice, and upon receipt of Surety’s review and acceptance of all completed paperwork, final contract and bond premiums are processed. At this point, The Surety Place will issue the performance bond necessary for the job, often with a payment bond in tow. The performance bond and payment bond will secure the following:
The contractors go to a surety insurance agency to issue these performance and payment guarantees. The underwriters of the surety insurance agency will consider three things to create the contractor’s bond:
Smaller contract, hard to place bonds up to $400,000
Prime contracts up to $3 MM with an aggregate program totaling $6 MM
Any contracts over $3 + MM with an aggregate program totaling $6+ MM
Full Account Underwriting
When the job is completed as promised, the performance bond has now been fulfilled. This, in turn, ends the performance bond contract.
To end the payment bond, the city or project owner requires paperwork that the contractor has paid all the suppliers and subcontractors. Once the paperwork has been signed by the City or project owner it’s marked as complete which ends the payment bond contract.
Should anything happen to the building once the bond contract has ended, the project owner has one year to contact the contractor for any maintenance related repairs.
The Surety Place, previously known as Surety Placement Services, was founded in 2002 with the number one goal to bring innovation and a high level of service the industry had not yet seen. As industry leaders from the start, we are a people first surety bond partner that you can trust! We establish a relationship with you in order to truly understand your business focus, whether it is large or small, complicated or difficult. As one of the only true specialists within the industry we supply access, partnerships and specialty programs with numerous “A” rated sureties across the nation. We pride ourselves on being here to help you; we want to service all your bonding needs with no appointments or contracts necessary.
Our industry knowledge and expertise, coupled with our specialty programs, allows us the unique ability to write your bonds when no one else can. We have over 50 years of combined surety experience, which makes us some of the best in the industry. Our dedicated account managers are all highly trained underwriters who provide our agents and clients a tailored bonding solution for individual or corporate needs. In today’s marketplace, surety access can be limited; but with Surety Place as your partner, you’ll find the white-glove service you have been searching for.
No matter the size of the bond or how complicated, Surety Place is built to find you an answer. Poor credit, financial hardship, fast growth, or just getting your company off the ground? We have options for you no matter what your circumstances are. We understand business. We also understand how difficult it can be when something that seems like such a small piece of the puzzle gets in the way of closing the deal or moving forward. We take that pressure off your mind so YOU can get back to work.
At The Surety Place, we pride ourselves in our customer service! If you have any questions regarding a bond placement, give us a call or fill out the form to the right of the screen and one of our experienced staff members will be in touch with you shortly!