Quite a few development projects carry on minus the necessity for a contract surety bond. However, for most government compensated projects, surety will be required for companies to even make a preliminary bid. Federal projects to illustrate, require companies to possess these instruments on projects that exceed $100,000 in amount for development, modification, or repair of any structure or public work of the United States Government. This in addition saves time and effort of the entity working with a construction company as the licensed contractor has recently undergone a rigorous prequalification process and is judged equipped of fulfilling the obligations of a surety contract. In today’s highly competitive construction market, employing a surety bond can set an organization beyond its competition and help them get much needed work.
With surety bonds, you will find a agreement between three companies. First is the obligee which is the beneficiary the work is being performed for, next will be the principal which is the loan signing agent. entity doing the work, and last will be the surety, also know as the bonding company, which is the entity guaranteeing the principal will perform the job for the obligee. Nearly all bonds provided by a surety together with construction undertakings are bid bonds, performance bonds, and labor and material payment bonds.
In order for someone to obtain a contract surety bond, they are required to supply certain types of documents to be approved by the surety. The surety really needs to be confident that the principal is credible, can perform the project that is needed, and within the time specified. To do this the surety asks the principal for forms to prove they’re financially stable, and possess the essential experience to uphold its promise to the obligee. Those items routinely gathered during the process consist of the Bond application, business financial statements to determine solvency, the corporation owners resume to discover experience, and owner / owners financials and credit profile to check credibility of the principal decision makers performing the company functions.