Contract Bonds
Surety bonds provide financial security and construction assurance by assuring project owners that contractors will perform the work and pay specified subcontractors, laborers, and material suppliers. Although surety bonds are mandated by law on public works projects, the use of surety bonds on privately owned construction projects is at the owner's discretion. There are alternative forms of security, such as letters of credit, but they do not provide 100% protection, nor do they assure a competent contractor. The surety prequalifies the contractor based on reputation, financial strength and construction expertise.
There are three basic types of contract surety bonds:
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The bid bond assures that the bid has been submitted in good faith and that the contractor will enter into the contract at the price bid and provide the required performance and payment bonds.■
The performance bond protects the owner from financial loss should the contractor fail to perform the contract in accordance with its terms and conditions.■
The payment bond assures that the contractor will pay specified subcontractors, laborers, and material suppliers on the project.How to Apply
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