Surety Bonds Performance Bond Payment Bond Benefits Of Bonding Subs Prequalified subs Risk Transfer Improves contractor’s credit standing.

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Presentation transcript:

Surety Bonds Performance Bond Payment Bond

Benefits Of Bonding Subs Prequalified subs Risk Transfer Improves contractor’s credit standing

Business Operations Financial Strength Experience Sub Documents Exposure & Progress Size & Location Ability To Perform Prequalification Process

Indemnification Corporate & personal assets on the line Incentive for sub to complete bonded work

Availability of Surety Traditional sureties Specialized sureties SBA program

Confirm Ability To Provide Bonds

Limited Surety Capacity Labor-only contract Phased contract

Qualify The Subcontractor’s Surety A.M. Best Companywww.ambest.comwww.ambest.com Dun & Bradstreetwww.dnb.com/uswww.dnb.com/us Standard & Poor’swww.standardandpoors.comwww.standardandpoors.com Moody’swww.moodys.comwww.moodys.com Treasury Dept. State Insurance Dept.

Surety Rates Bid Bond Usually no or minimal charge Performance Bond ½ - 2% of contract price Payment Bond Usually included with Performance Bond)

Surety Communications Job status reports Provide early warnings of serious problems

Dispute vs. Default Performance obligations defined in subcontract Notify surety of problems Formal written declaration of default

Why Subcontractors Fail Accounting Issues Management Issues Personnel Issues Performance Issues Unrealistic Growth Failure

If Default Occurs Acknowledge claim Investigate claim Determine obligations Fulfill obligations Surety

Surety’s Options Assist subcontractor to completion Bring in replacement Negotiate financial settlement Surety

Establishing A Bonding Policy Establish thresholds Articulate exceptions Notify subcontractors & surety Contractor

For More Information Surety Information Office | SIO is a joint initiative of The National Association of Surety Bond Producers (NASBP) and Surety & Fidelity Association of America (SFAA).