What is a DoD Performance Bond?
A new regulation set by the Department of Defense (DoD) via the Military Surface Deployment and Distribution Command (SDDC) requires freight carriers transporting military freight to post a performance bond.
The Performance Bond secures performance and fulfillment of carrier obligations to deliver DOD freight. It will cover any instance where a carrier cannot or will not deliver DOD freight tendered to them. This includes default, abandoned shipments, and bankruptcy by the carrier.
The bond will not be utilized for operational problems such as late pickup or delivery, excessive transit times, refusals, no shows, improper/inadequate equipment, payment of subcontractors, or claims for lost or damaged cargo. Local drayage, commercial zone, barge, rail, sealift and pipeline carriers are exempt from the Performance Bond requirements.
What's the DoD Performance Bond Amount?
The amount of the Performance Bond is based on the size of the company and the number of states intended to service. Large companies may select one (1) state for bond amount of $25,000; two (2) to three (3) states for bond amount of $50,000; four (4) or more states for bond amount of $100,000.
Carriers registered with the Small Business Administration (SBA), http://www.sba.gov, or http://www.ccr.gov, may select up to three (3) states with a Performance Bond of $25,000, up to10 states with a Performance Bond of $50,000 and 11 or more states for $100,000. To utilize these bond amounts, when submitting your bond information, you must provide supporting 5 documentation that you are registered with the SBA. When registering, ensure you select the states for movement in accordance with the appropriate Performance Bond amounts. Movements must begin and end in one of the selected states.
Carriers that have conducted business in their own name with DOD for 3 or more years will be required to submit a Performance Bond in the amount of 2.5% of their total DOD revenue for the previous 12 months, not to exceed $100,000 and not less than $25,000.
Bulk fuel carriers are only required to submit a $25,000 Performance Bond.
The Performance Bond amount is set at $100,000 for Surface Freight Forwarders, Shipper Agents, Brokers, and Air Freight Forwarders due to the volume of traffic handled by these modes.
How Much Does a DoD Performance Bond Cost?
The cost of an the bond depends on a few different factors, including the amount of the bond and the applicants financial strength (e.g. personal credit score, business assets and liabilities, etc.).