Posted on: 18 May 2018
Whether you're trying to start a construction company or are trying to hire a construction contractor, you need to know a little about construction bonds. Construction work can be highly involved and high risk. Bonds are designed to ensure that the job can be done. It's important for contractors to be licensed and bonded, but there are different types of bonds.
Bid bonds make it possible for a construction company to bid on jobs that are bonded. Otherwise, there might not be a guarantee that your bid is accurate. Bonding your bid ensures that you are at least attempting to create an accurate bid, even though there may still be some adjustments to the bid made later on. This ensures that a company doesn't low ball its bids just to secure the job.
How can an individual or business be sure that the contractor will do good work? A performance bond ensures that the work is completed up to the specifications of the contract. If it isn't, the owner my be able to get a reimbursement for the labor and to get the job corrected.
Contracting companies have laborers, suppliers, and other contractors that they have to pay. A payment bond is intended to ensure that all third parties get paid on the job. For an employer, this is important, as no one wants to encounter a stopped construction job because the labor or vendors haven't been paid.
What happens after the work is done? The owner isn't going to want it to fall apart. Maintenance bonds ensure that the work will be adequately maintained and repaired for a certain amount of time following the job.
A supply bond is a special type of bond that is designed to ensure that suppliers have materials. Otherwise, it could be easy for a builder to get contracted to build a home only to find out that they can't guarantee the counter types, flooring types, or other materials available. For larger jobs, supply bonds are absolutely critical; a single delay in the supply chain could lead to expensive delays for the entirety of the project.
In addition to there being different types of bonds for construction contracting companies, there are also different requirements for each bond. A construction company looking to secure a bond may need to consult with their local bonding agent.Share