Construction Performance Bonds
Arms, generators, radio towers, tree removal, computers, softward, fire alarms, ornamental work, scaffolding, water towers, lighting, and resurfacing of existing roads/paved areas. (Most service contracts fit into this category.) These are also known as “supply and maintenance” contracts.
Vertical projects. Class B includes most building and sub-trade construction work associated with the completion of buildings. Dams and locks, sewers, tunnels, power lines, fiber optic, etc., are other examples.
Bridges, curbing, guttering, highways, airport runways, roofing, siding, parks, and machinery made to special order.
Each class of work has its own set of unique risks. A skillful surety bond underwriter must be aware of the differences between each class, his or her surety’s experience with the type of work to be undertaken, project geographic location, labor availability / prevailing wages and benefit practices, and any special environmental hazards that might accompany the work such as asbestos or chemical byproducts. Surety One, Inc.’s underwriters posses seasoned working knowledge of most major industry and commercial services sectors. This is an important intellectual asset, one which most of our competitors lack. Our broad industry experience and expertise ensures our rapid review of a contract performance bond request. The size of your contract surety bond request is irrelevant. We will offer surety bonding from $5,000 to well over U.S. $1bn. Our clients enjoy the significant capacity of our surety partners as well as a strong, lasting relationship with underwriters that know them.
Performance Bonds Are a Requirement on Federal Work
The Miller Act (40 U.S.C. §§ 3131-3134) is the federal code which requires contract surety bonds on federal construction project. The mechanism is implemented through the Federal Acquisition Regulations (48 CFR Subpart 28.1). The Code obligates a general contractor on a federal job to file a performance bond AND a payment bond when said project exceeds $150,000 for the construction, alteration or repair of any building or public work belonging to the United States. A corporate surety company issuing these bonds must appear on the U.S. Treasury’s circular (“T-List“) of sureties acceptable for federal obligations.
A “performance bond” must be executed in an amount that the contracting officer deems “adequate” to protect the federal government. The Acquisition Regulations suggest that 100% of the contract price should be the requirement. Exceptions can be made but only by a specific determination by the federal contracting officer who justifies that a lesser amount is adequate.
A “payment bond” is required to ensure that suppliers of labor and materials will be paid for their products and services. The amount of the payment bond must be equal to the total amount payable under the terms of the contract. As with the performance bond, 100% of the contract price is generally the rule. A deviation must likewise be justified by the federal contracting officer by written determination supported by his or her specific findings of fact that the payment bond amount is impractical. The payment bond penalty may NOT be less than the amount of the performance bond. Payment bonds must be posted when the contract value is in excess of thirty thousand dollars ($30,000). The Miller Act payment bond covers subcontractors and suppliers of material who have direct contracts with the prime contractor. These are called first-tier claimants. The payment bond also covers subcontractors and material suppliers that have contracts with a subcontractor. These claimants are called second-tier claimants.
Performance Bonds Are “Often” Required on State and Local Work
Most states have implemented “little Miller Acts” for state-owned projects. Local municipalities also often require payment and performance bonding for contracts that exceed a specific threshold. Those surety bond requirements are generally defined in local requests for proposals (RFPs).
Commercial Contract Performance Bonds
Construction (sticks & bricks) contractors are not the only professionals that need performance bonds. Commercial service contractors offer ongoing services, or are manufacturers, retailers or wholesalers that supply, deliver and install specific products. We have a significant appetite for these business. Regardless of whether the contractor’s client is a state, federal or private client, Surety One, Inc. will provide terms. We do NOT decline any serious submission however our target classes of commercial business are, . . .
Reclamation Performance Bonds
Reclamation surety bonds required by the Bureau of Land Management (BLM) and various state environmental agencies are long term surety obligations. Generally, these surety bonds cannot be canceled, adequate performance can be highly subjective, and bond losses can be large. These and other onerous provisions require the input of underwriters with knowledge and experience in the reclamation field. You can trust Surety One, Inc. to carefully review your application, provide expert feedback, and offer fair bond terms for these difficult surety needs. For further information about this very unique surety bond class visit our sister portal at www.ReclamationBonds.com.
Waste Landfill Closure & Post Closure Performance Bonds
A landfill operator provides a performance surety bond from a surety company that guarantees that the operator will pay for or perform all required closure and post-closure care. If the owner/operator fails to meet the requirements specified in the bond, the surety company assumes full liability and must perform all of the duties specified in the bond or cede the bond penalty to the Obligee. When offering a peformance bond to evidence propert financial assurance, the operator may also be required to establish a standby trust fund into which the surety company will make payments if the operator fails in fulfilling the closure/post-closure duties. Because of the highly risky and onerous nature of these surety bond obligations as well as their potential to remain in force for decades, our underwriters prepare custom application packages for each applicant. If you have a landfill bond need please email Underwriting@SuretyOne.com.
International Contract Surety / International Performance Bonding
As a result of mass internet access and the growth of trustworthy multi-national banking institutions, contractors are more likely than ever to consider accepting projects outside of the United States. The United States is also a very attractive environment for foreign contractors wishing to accept work within the states and territories. International surety bond underwriting presents significant obstacles. For the U.S. contractor performing abroad the chief concerns are the extraordinary geographic footprint and the trustworthiness of the legal forums in which disputes may be settled. In the case of reverse flow international surety bonding, the drafting and perfection of international indemnity agreements, proper analysis of financial statements prepared to foreign standards, claims and collections issues, and the proper premium rating for bonds issued for less than full value of contracts represent significant deviations from standard U.S. surety underwriting practices. An international surety underwriter should possess superlative working knowledge of advance payment bonds (very popular across latin america), reverse flow bonding, cultural differences and business social protocols of the country in which work is performed, and the necessary language skills to maintain open lines of communication. Demand for international surety bonds, advance payment bonds and international financial guarantee will continue to grow, requiring surety companies to commit themselves to understanding and underwriting them.
Public Private Partnerships & Surety Bonding
The American Subcontractors Association in collaboration with the National Association of Surety Bond Producers and the Surety and Fidelity Association of America, have produced the following compendium of P3 laws and current bonding requirements. As the popularity of public private partnerships grows, these laws and the performance bond requirements will change.
Public-Private Partnership Laws in the States