Bidding on Government Projects Requires the Right Bond

Bidding on Government Projects Requires the Right Bond

A contractor bond is a kind of financial security used in contract bid proposals, it is used as a way to guarantee that the bids are serious and that the contractors have enough financial stability to complete the project. They are required for public construction in America and it´s intended to keep bidders that are not committed or serious enough to carry on with a project. It´s usually accompanied by a performance bond and a payment bond. The first one will commit the contractor to perform the contract considering the proposed terms and conditions, with the agreed price and to have it ready at the stipulated time. The second one will protect the workers and suppliers against nonpayment. In most cases the three aspects go hand in hand, I mean, if you are presenting a contractor bond, it usually must have a performance and a payment bond as well for public construction projects.  Here is an example of a performance bond.

Why are Contractor Bonds a way to be protected by the law?

In order to avoid failures in the contracts awarded to private firms and considering that years ago most of these contracts actually ended up in failure, mostly because the contractor didn’t have enough resources to complete the project and just used to abandon it. The consequence was that the taxpayers ended up assuming the extra costs in order to finish the abandoned projects.Of course, this also implied that the workers and suppliers were not paid for their services and that was another cost that the taxpayers also had to assume.
What happened after this story was that in 1894 the Congress authorized the use of security bonds to secure construction contracts and since 1935 the payment bonds are required to be considered in the awarding of any contract in the public sector by protecting the owner, laborers, and suppliers against a failure of the contractors.

What are the characteristics of a Bid Bond and what should you be aware of?

  • Be aware of the job specifications and the specific requirements for the bond.
  • They have a flat fee of $100 per contract
  • They usually require a bid of performance and a bid of payment
  • You should be aware of any formats that should be included with the bond or you can use a standard application online that covers most of the questions required for the Bid Bond
  • You need to be aware of the credentials required to process your application
  • Check with your bond agent in order to submit the bid proposal in an accurate and complete way.
  • Complete thework, minding the specifications of the proposal.
  • Once you have completed the job, talk to your bond agent to free your bond line.
Make Sure Your Commercial Contractor is Fully Insured

Make Sure Your Commercial Contractor is Fully Insured

It is important that your contractor is insured, for your own protection. It helps to ensure that you are working with a professional who has a good reputation.

Contractor Insurance

There are two types of a contractor’s insurance, liability insurance and worker’s compensation. Liability insurance will cover certain situations such as damage that your contractor may have caused to your property. Although liability insurance does not usually pay for repairing or replacing work that they may have done that is substandard.

The second type of insurance is worker’s compensation that provides payment to workers who may be injured, lost wages or medical services, no matter who caused the injury. Workers compensation coverage will further provide benefits to the family of the contractor in the event of a death that was related to the contractor’s work.

This is why it is vital that you find out if your contractor is insured before they begin working on the project. The simplest way to do this is to ask the contractor that you are considering hiring to show you certificates of insurance. Once you have these certificates, make sure that you check that the policies are current.

Contractor Bonds

It is also important that your contractor have a bond, this will protect you if the contractor you have hired fails to complete the job that you hired them for, or if they fail to pay for permits, meet various financial obligations (this would include paying for supplies, covering damage that workers may have caused to your property, or paying subcontractors).

In order for a company to be bonded, they would have had to pay a premium to a surety company. You can check this by asking the contractor you’re considering for their bond number and certification, to ensure that they are properly bonded. If you find the bond isn’t complete or you feel that it might be subpar, you could contact their surety company directly, to check. Bonding requirements vary, depending on the state and municipality where you stay.

While you’re checking whether your desired contractor is insured and bonded, be sure to also check if your contractor’s specific trade requires a licence. Various states require particular licences for specific trades, such as plumbers, electricians, or HVAC. It is very important to check this as in some states, if a contractor is not licenced according to their trade, they may be unable to get insurance or bonding. This is also important to check as if a building inspector checks the work and finds that it is being done by contractors who are not properly licenced, they have the power to halt the work.