Construction doesn’t have to be a risky business for the contractor, the project manager, and whoever issues the project. Contract performance bonds can help minimize damage to both parties if anything does go wrong. Placing the trust of your contract performance bonds with Pinnacle Surety can take that weight off your shoulders. It also looks impressive to any potential clients looking to hire a contractor to be able to obtain performance bonds through a surety company, demonstrating your construction company as reliable and trustworthy.
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What is a Performance Bond?
A performance bond is a type of construction contract bond that ensures that contracts are completed. Contract bonds are helpful for both parties when a construction company is taking on a project. For example, if you’ve hired a construction company, a contract performance bond safeguards your money if the work is not completed. Alternatively, if you manage a construction company, a performance bond protects you from customers who fail to pay an invoice in time.
When a construction company is hired, the association or person responsible for hiring may require the construction contractor to post a performance bond as part of their contract. Several details may need to be met for the contract to be completed to a satisfying degree, such as timing, price, and detailed work.
Performance bonds are usually required by law on projects for public work which are commissioned by local, state, or federal government but are becoming increasingly popular for private construction work. Using a surety company, like Pinnacle Surety, the risk of construction falls on their shoulders regarding performance bonds. It is now their responsibility to make sure the project is achieved. By gaining a performance bond from a surety company, a construction company also minimizes the risk of any fallout impacting their company. It demonstrates that your company is trustworthy and reliable enough that a surety company feels confident in issuing a performance bond.
Types of Performance Bonds
Construction performance bonds are worth considering when taking on a construction project. For example, subdivision bonds are very similar to performance bonds but specify that the construction work will guarantee the completion of improvement rather than completing the details of the contract. Similarly, completion bonds also safeguard against a project not being completed but focus on a successful culmination of an entire project, while performance bonds concentrate on meeting contract requirements.
When accepting a construction project, it is also crucial to consider bid bonds, as they are used when bidding to win a job. Bid bonds work similarly to performance bonds, ensuring that a construction company will perform the work needed to completion if their bid wins them the job.
Usually, the penalty for breaking a bid bond is 10% of the calculated project worth, although it can be as low as 5%, and, for federal construction projects, as high as 20%. Providing a bid bond and others, like completion bonds for construction, indicates that a contractor has qualified for one through a bonding company, increasing the trust and reliability value for potential customers.
Payment bonds, also known as labor and material bonds, are usually required for construction projects jointly with performance bonds. Payment bonds ensure that the contractor will pay all subcontractors, laborers, and any material suppliers they use to complete the contract. To claim money from a payment bond, a laborer, supplier, or subcontractor mandates that they confirm and prove they contributed to the construction work, and notices are often required from a project owner to show the use of labor or materials. Payment and performance bonds for construction are also a way to protect everyone involved in the project and signify your construction business is reliable, fair, and dependable.
Like a payment bond, subcontractor performance bonds are an agreement between the subcontractor and a surety company. The surety company can ensure the subcontract is completed if the original subcontractor is unable to continue working on the construction project. Also similar is the subcontractor default insurance or SDI, which proves cover if the performance of a subcontractor causes a financial loss for the general contractor or construction manager.
Why You Should Choose Pinnacle Surety
Pinnacle Surety works quickly and deftly to provide you with the best possible service, including a 24-hour turnaround for pre-qualification and approval for bid bonds. In addition, Pinnacle Surety’s singular focus on bonds and bonding ensures that they’re not distracted by any side projects and can offer competitive bond programs with expertise. Pinnacle Surety has 25 years of experience to help you decide and organize which bonds are best for your company and is dedicated to the needs of their clients.
Hiring a surety company to issue your construction company contract performance bonds is a fantastic way to bring your company to a new level of renown and credibility. In addition, it proves to any potential clients that your construction business is dependable and can be relied upon to complete contracts to a high standard.
If you’re any doubt, you can find case studies and testimonials on our website, including from the president of Doug Wall Construction Inc. He stated that ‘Pinnacle Surety has provided bonds for Doug Wall Construction for 15 years […] Eric encouraged us to keep tight control of our overhead, which helped us through some lean years. […] He has never let me nor Doug Wall Construction down and it is due to his strong expertise in the bonds only business.’ Our commitment to our clients and their needs means we hope you’ll be working with us for years to come.
Trusting in Pinnacle Surety to issue any performance bonds you may need guarantees quick and informative replies to any queries, competitive premium rates, and the opportunity to maximize your contracting company’s bonding prospects.
Get started on bringing your construction company to the next level by contacting us by phone on (844) 612-7238 or through our website. We can discuss and advise you on different options and which contract performance bonds are best suited to you.