A construction contract bond is often required on construction projects for both security and trust. In the construction industry, there will be a payment bond in addition to a performance bond. These bonds form a three-way contract between the Owner, the contractor and the surety. This provides adequate security to assure you that all subcontractors, laborers, and material suppliers will be paid and without loss should an issue arise during the process. This gives all parties security and these surety bonds should be implemented before the construction begins.
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You may have heard of both “contract bonds” and “construction bonds” – they mean the same thing and both serve as required security construction projects. Construction bonds also exist to ensure that a construction job can be completed with the necessary funds. Performance bonds will ensure that the contract is met and completed without loss of assets and construction performance bonds will be a wise idea to ensure there is zero risk against the contractor and that all subcontractors and workers will be paid.
Surety Bonds for Commercial Construction Projects
For many years, these types of bonds have been used as security for many large scale commercial projects. However, it is not uncommon to see requests from much smaller sized construction projects also. This essentially means that there are a number of benefits that any company can take advantage of. To break down further, if you are a smaller scale business, the loss of assets and money from a broken contract could cause colossal damage to your business. Protecting yourself from this can salvage your work and business alike which means that you can look at saving yourself time, money, and hassle if things go wrong. Plus you can increase your capabilities and grow your business by winning bids with the right surety bonds in place.
These bonds safeguard the owner, contractor, and the people associated with the project which may include the public to keep all parties safe and government projects will most likely expect these bonds in place, especially if the taxpayer is contributing to the capital. With a simple submission you can see if you are eligible and the best bonds available for the project. Private owners look at Payment Bonds, Bid Bonds and Completion Bonds when acquiring a new project to ensure that a contractor, who may struggle to complete any work will still be paid and the project can be completed.
Within the construction industry, there are a number of issues that can arise. With Developer Surety Bonds, used exclusively by developers, you can ensure that you have the necessary products available, including subdivision bonds which can provide protection to a local government, guaranteeing that the developer will complete improvements if it is to become part of a public domain.
Are Bonds Mandatory?
As previously mentioned, plenty of government developments will require a mandatory bond or any company that is issued capital from a government body. In addition to this, bid bonds may also be mandatory in specific situations. Often, it is mandatory when it comes to the competitive process bidding. Each potential contractor must submit their bid bond with their bids so that the project owner has protection just in case the contractor pulls out at the last minute or realizes that they do not have the amount of capital or time to complete the project. After winning the bid, it is vital that they can have the security to back it up, to ensure a smooth-running project.
Bid bonds also help assure project developers that contractors are entering serious proposals and are dedicated to the project, in addition to the correct financial credentials that they may need to undertake the project. Not all projects need bid bonds, but they can be requested frequently and it should be noted that you will most likely need one in this instance.
You may also find that certain countries, states, or cities will require a contractor license bond. Again whilst it is not a legal requirement, it may result in the loss of a project contract if you cannot assure them of a bond. If the bonds are not in place before the project begins, then some contractors may not be able to obtain a license for the project. Maintenance bonds will protect against this and ensure that if there are any issues following the project’s completion, any necessary repairs, or changes will be made efficiently and promptly with the correct capital in place. All construction contract bonds are vital for efficiency within business and the appropriate security for all parties. This not only instills confidence in all parties but allows for further work and commissions in the future, with a solid, secure financial history and insurance in place.
For further information in relation to the bonds available and how we can assist your business to protect all its assets, please do not hesitate to contact us today. One of our friendly and professional team members will gladly answer all of your questions relating to the above.