Also known as construction bonds, contract bonds are guarantees that a contractor will abide by the specifications of a construction contract. This includes performing the work properly and paying specified subcontractors, laborers and material suppliers.
Contract bond types
Guarantees that a contractor will enter into a contract, if awarded, and furnish contract bonds as required by the contract terms.
Guarantees faithful performance of the terms of a contract for construction or furnishing of supplies.
Guarantees payment for labor and materials used in the work the contractor is obligated to perform.
Guarantees against loss because of defective workmanship or materials used on a construction project.
The bonding process
“Bonding” is the vetting process for contractors seeking a contract surety bond. Before we issue a contract surety bond, we evaluate the contractor’s qualifications. Ultimately, we want to assure the project owner that the contractor has the resources and capacity to perform the contract according to its terms and conditions.
Many surety companies have stringent financial reporting requirements for contractors, such as requiring contractors to provide CPA-prepared financial statements. In some cases, we accept alternate forms of financial statements, such as in-house prepared statements and income tax returns. For new contract bond submissions, we require the 3 most recent year-end business financial statements and a current year-end personal financial statement for each owner.