Surety Bonds 101
- Frequently Asked Questions
- What is a Surety Bond?
- Surety Bond Cost
- Bond Premium Calculator
- What Does "Bonded" Mean?
- How to Get Bonded & Insured
- Types of Surety Bonds
- Buying a Surety Bond
- Top 5 Things You Need to Know About Surety Bonds
- Surety Bond Process
- Choose a Bond Agency
- Choose a Bonding Company
- Get Bonding Insurance
- Surety Bond Rates
- What is an Indemnity Agreement?
- Get a Quote Online
- What is a security bond?
- Surety Bond Claims
- General Questions
- License & Permit Bond Guides
- Contractor Bond Guides
- Fidelity Bond Guides
- Surety Tools
Do you want to know the exact cost of your surety bond?
How Do Bid, Performance and Payment Bonds Work?
Bid & Performance Bonds Explained
|Contractor||I'm a contractor new to surety bonding and need some guidance. I want to bid on public work, but I don't know how bid and performance bonds work.|
|JW||Sure, I can help. First let's take a look at bid bonds. They are required for you to submit your proposal on public contracts. Think of the bid bond as your foot in the door so to speak.|
|Contractor||That's straightforward enough. I previously learned that all surety bonds guarantee something, so what do bid bonds guarantee?|
|JW||Good question! The bid bond guarantees that if you are awarded the contract that the bonding company will provide you a performance bond. That's why bonding companies have to underwrite the performance bond prior to issuing the bid bond. If they write a bid bond for you and fail to provide the performance bond, the government can place a claim on the bid bond.|
|Contractor||Ok, so then what does the performance bond guarantee?|
|JW||The performance bond is what actually guarantees your work. Should you fail to complete the project per the terms of the contract, a claim can be placed on the performance bond.|
|Contractor||That makes sense. I've heard people call it a "performance & payment bond". Is that the same thing?|
|JW||A payment bond guarantees that you will pay your sub-contractors and suppliers. Since this goes along with completing the contract in full, the payment bond is usually lumped in together with the performance bond.|
|Contractor||Awesome! So I only pay for the bid bond and the performance bond...What are the costs?|
|JW||You've just opened up another discussion. We'll talk about performance and bid bond costs in our next video.|
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