Virtually all of the public construction work in America is accomplished by private sector firms. This work generally is awarded to the lowest responsive bidder through the open competitive sealed bid system. Contract Bonds play a critical role in making the system work.

Federal, state and local government agencies require Contract Bonds on taxpayer funded projects to guarantee completion of the contract in accordance with its terms and conditions, at the agreed upon price, and within the time allowed. Contract Bonds also protect certain laborers, material suppliers and subcontractors against nonpayment since mechanic’s liens cannot be placed against public property.

Contract Bonds are not mandated for private work, but are frequently required by private owners, lenders, and more often by general contractors and construction managers.

Examples include:

Bid Bonds – guarantee the contractor’s promise to enter into a contract with the owner in the event their bid is accepted and a contract is awarded.

Performance Bonds – can be provided on construction, service and supply contracts, and guarantee the contractor will perform in accordance with the terms and conditions of the contract.

Payment Bonds – are usually required with Performance Bonds, and guarantee that suppliers, subcontractors and laborers will be paid.

Site Improvement & Subdivision Bonds – guarantees work required by ordinance will be completed by the property owner, builder or developer within a certain period of time and in accordance with the municipality’s requirements. The requirements often include the construction of roads, sidewalks, curbs, sewers, storm drains, and other underground utilities.

Supply Bonds – guarantee the contractor will perform in accordance with the terms and conditions of the contract.

Maintenance Bonds – Maintenance Bonds guarantee the quality of a contractor’s work beyond the standard one to two year period stipulated in most contracts.

Small Contract Bonds

Surety Bond Associates offers a variety of streamlined programs for small contractors with good credit and bond needs up to $1,000,000.

SBA Surety Bond Guarantee Program

Surety Bond Associates represents surety companies that participate in the SBA Surety Bond Guarantee Program to assist in writing harder to place contract bonds. SBA can guarantee bid, performance and payment bonds for individual contracts of $6,500,000 or less for qualified contractors who cannot obtain surety bonds through regular commercial channels.

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