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What Are Bid And Performance Bonds?

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What Are Bid And Performance Bonds?

Most public construction contracts require contractors or subcontractors to secure their bids by providing bid bonds.

Contractors, who may want to be taken more seriously as a contender for a project submit these bonds along with their proposal. Being bonded assures the project owner that the bidder has the financial means, knowledge, experience and manpower to complete the job they are bidding on.

During the selection process, the contractor is required to submit a bid bond or a check for 10% of the bid amount not to exceed $20,000. The bid bond assures the project owner that the bid is being submitted in good faith and that the contractor intends to enter the contract at the price bid and provide the required Performance and Payment bonds.

The project owners review the bonds and we believe will choose the lowest bidder to save money.  Once the contractor is awarded the bid it is time for the issuance of the Performance and Payment Bond.

The Performance and Payment Bond protects the owner from financial loss in the event the contractor fails to perform (performance bond) the contract in accordance with the terms and conditions of the contract and that the contractor will pay (payment bond) their workers, subcontractors and material suppliers.

If the contractor provides the performance and payment bond, yet fails to complete the contract under the contract’s terms and conditions or runs into financial problems, the owner may make a claim against the Performance bond. They may also make a claim if the work performed by a contractor is poor or defective – the project owner may make a claim against the performance bond to provide compensation for the cost of re-doing or correcting the job.

When this happens the surety steps in and may arrange for a replacement contractor, have the job rebid for completion or provide financial assistance to the contractor to ensure the job gets completed.

At Glenn Insurance, bonds are our specialty! With more than a century of experience caring about South Jersey businesses and families, our experts will be happy to can take care of work with you on all your bonding service needs.

To learn more about our bonding services, call our bond specialists.

•           Kamini (609) 857-6616, KPatel@GlennInsurance.com.

•           Kelly (856) 777-5410, KSmuzinsky@GlennInsurance.com

For more information about Glenn Insurance bonds, click here.

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