Surety Bond Services Bid
Performance | Payment | License & Permit | Mortgage Broker | Medicare
A Bid Bond is given to a Federal, State, County or Municipal Government
agency at the time of a bid to guarantee the good faith of the
Contractor (Principal). If the Principal is awarded the contract,
the Principal will enter into the contract and post the required
Performance and Payment Bonds. Bid bonds are typically required
as a percentage of the bid, usually 5%.
Failure to enter the contract and post the Performance and Payment
Bonds generally leads either to forfeiture of the Bid Bond (usually
5% to 20% of the bid) or more commonly, payment of the difference
between the bidder's price and the second low bidder's price or
the bond amount, whichever is less. Bid bonds are usually required
on public projects with formal competitive bidding, but are less
frequently used on private projects.
The Performance Bond follows the Bid Bond if the Principal (Contractor)
is awarded a contract by the owner. The Performance Bond is a
non-cancellable obligation which guarantees that the contractor
will complete the contract in accordance with the terms, conditions
and specifications of the contract. It is required as a condition
of being awarded the contract.
If the Principal defaults, or is terminated for default by the
owner, the owner may call upon the surety to complete the contract.
Many performance bonds give the surety three choices:
|| completing the contract itself through a completion
contractor (taking up the contract);
||selecting a new contractor to contract directly
with the owner;
||or allowing the owner to complete the work with
the surety paying the costs
The penal sum of the Performance Bond is usually 100% of the
construction contract, and is automatically increased when change
orders are issued. The premium charged for the Performance Bond
is always based on the final contract price.
A Payment Bond is usually required as a companion to the Performance
Bond, guaranteeing that material suppliers and direct labor suppliers
will be paid. There is no charge for Payment Bonds when issued
in conjunction with a 100% Performance Bond.
Payment Bonds guarantee payment of the contractor's obligation
for subcontractors, laborers, and materials suppliers associated
with a project. Since liens may not be placed on public jobs,
the Payment Bond may be the only protection for those supplying
labor or materials to a public job. The Principalís and Suretyís
obligations under the bond may be determined by statute (statutory
bonds) or by the wording of the bond itself (common law bonds).
License and Permit Bonds
These bonds are required as a condition of receiving a license
to engage in certain construction activities or as a condition
of receiving a permit. These bonds are generally compliance-related
and guarantee that the Principal will adhere to his or her obligations
under the license or permit. These bonds are designed to protect
the general public as well as the governmental agency issuing
the permit or license. License or Permit bonds are required from
businesses as well as individuals. Typically these bonds are cancellable
by the surety with written notice to the obligee.
Mortgage Broker Bonds
Mortgage Broker bonds are now required by the State of Colorado
to legally provide mortgages to residents. To qualify you must
complete an application and have a credit score that qualifies.
Premiums range from $175 to $250 annually depending on credit
score. Contact us to obtain an application.
On December 29, 2008 the federal government announced a new surety
bond requirement for vendors of the Medicare program that provide
Medical Equipment, Prosthetics, Orthotics and Supplies, or DMEPOS.
All existing vendors must have their $50,000 surety bonds in place
by October 2, 2009. The surety bond requirement is designed to
limit the Medicare program risk from fraudulent equipment suppliers
and help to ensure that only those suppliers who remain in the
program furnish items to Medicare beneficiaries that are considered
reasonable and necessary from legitimate DMEPOs suppliers. Contact
us with any questions that you have.