Getting A Bid Bond With No Performance Bond Required
Can You Get Bid Bonds Without Performance Bonds?
Simply put, probably not. Most surety companies won't provide you bid bonds for projects that leave out performance bond requirements because there is more risk involved without having performance bonding to ensure projects will be completed properly. Bid, performance and payment bonds are almost always required by law for public jobs. Why? These bonds are protection for the public because they guarantee that your bid will be accurate, that you'll complete the work properly and that you'll pay any subcontractors or suppliers according to the contract. Find out more about how bid and performance bonds work hand in hand.
Please be advised, there are times when job owners don't require performance bonds, and there are downfalls that come along with leaving the bond requirements out.
3 Reasons Jobs Without Performance Bonds Are Risky
One: Subs and Suppliers Aren't Protected
When public contracts are bonded with performance and payment bonds, the laborers, subcontractors and suppliers are protected because the bonds ensure they will get paid. If no performance and payment bonds are required, the subs and suppliers have no way of getting paid if the contractor defaults or goes bankrupt. Keep in mind, if a contractor bids on and wins several public contracts without performance and payment bonding requirements and goes bankrupt, all of the subs and suppliers on each of these jobs will be left unpaid.
Two: Less Growth for Your Business
The surety company is one of your greatest allies when bidding on public projects, as they will work with you to help you meet the various requirements to get bonded and pair you with jobs that you can reasonably handle. Both of these will result in helping grow your business. It benefits both you and the surety company to build a strong relationship because it allows you to build your experience and track record for future projects, while the surety company benefits by having a business that consistently wins projects and needs bonding. Learn how you can increase your construction bond limits.
Even if some jobs don't require payment and performance bonds, you will need to get bonded eventually since the majority of public projects do require the bonds. The longer a small contractor waits to get bonded, the harder it will be since there won't be a track record of meeting the necessary requirements for bonding and performing bonded work.
Three: Waiving Performance Bonds Puts Taxpayers at Risk
As mentioned above, payment and performance bonds protect the public. If a contractor defaults on a job that isn't bonded with performance and payment bonds, the taxpayers will end up paying for an entirely new contractor to come in and complete the job. On the slip side, if a contractor defaults on a bonded project, a claim can be filed on the performance bond to pay for a new contractor to get the job done.
Author: Eric Weisbrot
Eric is an industry expert that specializes in taking complex surety concepts and explaining them in terms that make sense to the general public. He also manages the JW Surety Bonds website and works with various partners to help further educate the public on suretyship using various mediums.
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