Who Will Be Required To Present Performance Bonds For Construction Projects?

 

There are many different ways that you, the contractor will be required to present performance bonds for construction projects. And it is only after you have come low in the project bid and got green light to execute the project that you are expected to activate or take the performance bond.

Many different groups and individuals can award some project executions to you if you are a construction contractor. It is the oblige that is the project owner and will be the one that hire you to execute the project. The oblige who may be the municipality, private individual or government will have to request for you to provide the guarantee performance bond.

There are three (3) known different ways through which most performance bonds for construction projects will be demanded for. These are;

         i.            A half price or fifty percent (50%) of the total value of the project.

       ii.            Full value or price of the project.

      iii.            Fifty percent (50%) cost of labor and material as well as your performance, making a full value for the project.

It is important to state at this point that the contractor will have known what he is expected to write in his bid which will have to be presented in a form of tender document.  The tender document will explain all the specification of the project or job. You will tell your broker what should be included in the performance bond and everything is done the way it should.

As a precautionary measure when it comes to factoring what should be in performance bonds for construction projects, you should try and put the cost of the bond in your bid. Do not try to make expenses of the performance bond a separate and additional cost. The company awarding the bond will let you know how much you will be paying which is usually a certain percentage of the total cost of the project.

Also, in determining the price for most performance bonds for construction projects, you will need to be sure that the project execution will be awarded to you. Even though, you will pay for the bond, know that it saves and helps you in so many ways;

a)      You do not have to be looking for the working capital again.

b)      You have an alternative guaranty for the owner of the project.

Due to the fact that every construction job or project is unique in its way and will need specific underwriting, you will have to consider many factors before estimating the cost of a performance or job completion bond.

Some of the factors to consider when determining the cost of performance bonds for construction projects are;

Ø  Preference of the surety company for specific type of contract or niche.

Ø  The size as well as the type of the project.

Ø  Total amount of the performance bond.

Ø  Special surety programs of the insurance company.

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