Conducting any business can be challenging in many ways, requiring both parties to assure one another of their capabilities to fulfill the commitment. While goodwill goes a long way, many require legal contracts that make it safer for people to begin and finish various projects without hassles.
One tool that can help facilitate this kind of efficiency is a bidbond. It is a contract between two parties intending to work together, enabling them to each have the peace of mind that they are entering into a reliable partnership.
New or amateur contractors with little to no knowledge of this concept will find the following enlightening.
What are they?
These contracts are insurance for project owners, also called obligees. They guarantee financial security if a contractor who bids on a project and gets it fails to perform the required responsibilities or backs out and refuses to take it up.
For instance, if you are bidding for a new construction or renovation project, a contract is required by some owners as security against last-minute project abandonment. The project owner can claim the bond for its entire value or settle for the difference between the initial and second bids.
Industries that need it
Generally speaking, every public project owner requires contractors (also called the principal) to provide surety bonds. Typically, these include defence construction, school boards, municipal owners, hospitals etc. Since they usually have large contracts that cost a significant amount of money, they need assurance that the contractor who wins the bid has the means to fulfill their commitment.
Professionals who almost always need to provide these bonds include general contractors, construction workers, snow removal and landscaping contractors, and electrical and mechanical contractors. The construction industry needs such contracts or agreements most, as many project owners seek them at the time of tender. Preparing them beforehand can save time and money, mitigating the risk of losing the bid.
An agreement of this type involves three main parties. First is the project owner, also called the obligee. Next is the contractor or subcontractor, also called the principal, who must provide the bond. Lastly, it involves a surety firm that will act as the guarantor for the contractor to fulfill their obligations. This party will pay the bond if the project owner claims it when the bidder fails to deliver or abandons the project entirely.
Note that the surety firm studies certain criteria before they provide bonds. These include the financial standing of the contractor seeking the bond, their reputation and character, and their capability to complete the project they wish to bid for.
How to get one
To secure a bid bond, the first thing you should do is seek the services of a reputable brokerage firm to get access to renowned surety firms providing them. These companies have been in the industry for decades, knowing how surety companies operate and the criteria they use to give bonds.
You can check the reputation and experience of the brokerage services you wish to use by browsing their website for client reviews and testimonials. Many also offer free consultations, patiently explaining the details of these contracts, why you need them, and how to go about it.
Lastly, reliable insurance brokerage firms can help with various requirements, such as developer, government, and construction bonds.