Contract Bonds

• Bid Bond
• Performance & Payment Bonds
• Maintenance Bond
• SBA & Other Alternatives
• Subdivision Bond
• Supply Bond

 
 
Federal, State, County and City governments are mandated under statutory laws to require bonds for construction projects. Federal law is covered under the Miller Act and the various State & some local governments have what are referred to as ‘Little Miller Acts,’ which closely mirror the Federal Act.

In the private sector, bonds may or may not be required for construction projects, but they are usually generated by lenders to ensure that the money going into a given project will result in a finished product to serve as collateral for a permanent loan. Project owners and developers often elect to require performance and payment bonds to be certain that the contractor has been properly pre-qualified and  that a bond is available in the event of contractor default along with protection against unpaid supplier and subcontractor bills, etc.

General contractors will require subcontractor bonds for the same purpose. The GC provides a lump sum guaranteed contract price to the project owner and they rely to some degree on the prices provided by various sub trades. If a subcontractor should default, or not pay all the bills on the job, the GC needs protection for the additional costs to bring the bills current and find a replacement subcontractor to complete the unfinished contract.

Bid bonds, construction bonds, performance bonds, and site improvement bonds all play a role in protecting project owners and developers from losing money due to contractors not fulfilling their contractual agreements.