How Surety Bonds Can Save the Day
Construction projects are the backbone of any construction company. Tight deadlines, logistical issues and pressures to complete the project within scope and budget are always present. With the need for so much coordination, it’s easy for vendors and contractors to drop the ball when it comes to delivering your products and supplies as scheduled, which threatens project completion and your brand image. By requiring contractors to purchase a surety bond, you improve the chances of successfully completing your project as planned.
What is a Surety Bond?
Surety bonds are contracts, much like the contract you use to purchase services and supplies from contractors and vendors. When you require contractors to purchase surety bonds, you are adding another level of protection against performance issues, which helps ensure that you finish your projects as scheduled. Surety bonds can provide you with the following benefits:
- Remedies for inadequate performance from contractors
- A capable replacement contractor
- A way to mitigate project risks
By requiring a surety bond, your project has protection from a variety of risks. In order to provide your project with complete protection, you must be familiar with the types of surety bonds available to contractors.
Types of Surety Bonds
The type of surety bond purchased by the contractor will impact remedies available to you. The bond you require your contractor to purchase will depend on the product or services the contractor provides and the potential risks the contractor faces. The following are a few surety bonds available.
- Performance bond: With performance surety bonds, you can hold contractors accountable for their performance during a contract.
- Ancillary bond: Ensures that contractors follow the requirements detailed in the statement of work, beyond performance issues.
- Bid bond: Guarantees that bidders complete the contract they’ve won.
Your business can require contractors to purchase one surety bond or combine different surety bonds in order to get the best performance.
Construction projects are critical to the success of your business. If you anticipate working with contractors to provide you with products and service to complete your project as scheduled, you should require them to purchase a surety bond to protect your project from risks. With a surety bond, contractors will have to meet performance and other requirements outlined in your statement of work, or reimburse you if they cannot perform.