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Bid Bonds are a way to ensure that contractors submit only serious bids. They provide assurances that companies bidding on projects have the financial ability to actually accept and perform the job they are bidding on. This type of bond is critical to project developers as they are able to submit a claim should a winning bidder retracts or attempts to walk away from a winning bid. The typical claim is to cover the increased costs incurred by being forced to take a higher bid price.
A Performance Bond is simply a way to ensure that the terms of the contract are adhered to and fulfilled by the contractor. Should a contractor fail to perform according to said contract, a claim can be made to provide funds needed to finish the project properly using a second contractor. On federally-funded projects that budget $100,000 or more, a performance bond is required by law according to the Miller Act.
A Payment Bond covers project developers who face the possibility of a contractor going bankrupt while completing the project. This bond provides funds needed to reimburse workers on the project who may not be paid by the lead contractor who has gone bankrupt. A Payment Bond is often teamed with Performance Bonds as both are required when a project budget meets or exceeds $100,000, in compliance with the Miller Act.
A Supply Bond protects project developers in the case that materials suppliers don't deliver according to the purchase order. The bond amount can be used to cover losses when a supplier fails to provide the necessary materials and supplies as outlined in each purchase order.
A Maintenance Bond protects project developers from subpar or defective materials, service or workmanship for a set period of time after project completion. Should the project turn out to be inferior or defective in any way, a claim can be made to cover cost of repairs of defective materials.
A Subdivision Bond ensures that contractors adhere to local subdivision regulations and provide renovation or building of typical subdivision structures such as waste management systems, sidewalks, streets and more. The bond protects a developer by providing funds to complete any subdivision regulatory requirements that a contractor fails to complete according to law.
Site Improvement Bond
A Site Improvement Bond covers the developer in the event that a contractor fails to live up to the contract in a renovation or property improvement. These types of bonds typically are used when renovating or improving older existing buildings and structures and covers the cost to complete the contract should the contractor fail to complete the improvement properly.
Contractor License Bond
The Contractor License Bond ensures project developers that each contractor will adhere to all applicable licenses and regulations according to law. These bonds are typically purchased by contractors as a pre-requisite to receiving their appropriate licenses.
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