Surety Bond Services Bid
Performance | Payment | License & Permit | Mortgage Broker | Medicare

 

Bid Bonds
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.

Performance Bonds
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.

Payment Bonds
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.

Medicare Bonds
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.

Bond Placements Ltd. (C) 2009-2013
7395 East Orchard Road ste 400 Greenwood Village, CO 80111
(c) 303-705-9887 (e) greg@bondplacementsltd.net (f) 303.758.8921