Before deciding whether to bid on a project or not, it helps to have a handle on the type of bond it requires. In some instances, the project description may provide the answers, but not always. Contractor surety bonds serve as a financial contract. You engage a bond issuer to guarantee that you will fulfill the work set forth in the bond. If you do not, the project manager may recoup money from the issuer to cover losses. Having a basic understanding of the four common construction-related surety bonds may help when it comes time to bid on a project.
Should your company win the bid, the project manager may insist on a performance bond. This instrument guarantees you will abide by standard industry practices and adhere to local laws. If you don’t, the project manager may ask the issuer to pay for those portions of the work not done properly. The project manager may also use the bond to cover the cost of hiring another construction company to complete the job.
When you go to bid on a project, especially for a government entity, you need to secure a bid bond. It provides reassurance to the entity that if it accepts your company’s bid to complete the project that you will take the job. If you do not follow through with the project, the entity may recoup money to cover all costs associated with restarting the bidding process. Government entities and municipalities require all contractors to have a bid bond before submitting a proposal.
Contractor License Bond
Unlike the other examples on this OH surety bonds list, a contractor license bond does not apply to a particular project. Instead, it acts as an umbrella policy. It guarantees prospective project managers that your company has the requisite business license. Having this at the ready may assuage reservations about your ability to operate legally in the state.
As a contractor, you have the responsibility to pay your crew and anyone else who performs work on the job or provides supplies. A payment bond covers those people and companies in the event you do not remit the requisite money.
About Haughn & Associates
Founded by Michael Haughn in 1986, Haughn & Associates is a full-service, family-owned, independent insurance agency based out of Dublin, Ohio. H&A strives to provide the best possible price and unique insurance solutions across a myriad of industries, including construction, IT, Habitation & Commercial Property, Agriculture, and Engineering. Devoted to providing the best of business insurance, life and disability insurance, personal insurance, employee benefits, and bonds, H&A is proof that success lies in long-standing client relations and satisfaction. To learn more about how H&A can be of service to you, contact us at (877) 802-2278.