1. Protection for Third Party Vendor Contracts Surety Bonds For Public Entities

2. Why Bonds Are Required Miller Act of 1935 –For federally funded public works projects over $150,000 “Little Miller Acts” –For state & local public works projects

3. What is a Surety Bond? Surety (Guarantor) Obligee (Public Entity) Principal (Vendor)

4. Surety Bonds Vs. Traditional Insurance Surety BondsInsurance 3-party agreement2-party agreement Risk transfer Duty to obligeeDuty to insured Regulated by State Insurance Departments Premium fee for prequalification services Premium actuarially determined Project specificUsually term specific Penal sumPolicy limits

5. Elements Of Prequalification Capital Capacity Character Capital Capacity Character

6. Capital: Financial Strength Capital Financial statements Net worth Cash flow Indemnity

7. Capacity: Ability to Perform Capital Financial statements Working capital Net worth Cash flows Indemnity Capacity Resumes Contingency plan Business plan - short & long term Equipment

8. Character: References & Reputation Character Reputation Relationships References Capital Financial statements Net worth Cash flows Indemnity Capacity Resumes Contingency plan Business plan - short & long term Equipment

9. Role of the Underwriter Review obligations Determine the risk Provide qualified principal to owner Underwriter

10. Underlying Agreement Primary instrument to establish risk associated with the guarantee Requirements contained in the contract documents

11. Functions of Surety Bonds Competitive bidding process “On time performance” Save tax dollars Protect taxpayer dollars Surety Bonds

12. The Advantages Of Surety Bonds Qualified vendors Competitive pricing Timely contract performance Quality product Financial recourse Insulates public officials Efficient management of public works administration Protect taxpayer dollars Surety Bonds

13. Surety vs. ILOC ILOCBond Financial prequalificationYesYes Capabilities prequalificationNoYes Review of contract documents and guarantee formsNoYes Guarantee completion NoYes Warranty period coveredNoYes CancellableYesNo/Yes 100% coverageNoYes Impact on bank lineYesNo

14. An Owner’s Guide To The Surety Claims Process

15. When Problems Arise.... Keep the surety informed of the principal’s progress If principal defaults, submit written declaration of default Allow the surety time to investigate the claim Obligee

16. Surety’s Responsibilities In a Claims Situation Principal’s contractual obligations Obligee’s contractual obligations Principal’s defense Whether the obligee has met its obligations Surety

17. Managing The Claims Process Be cognizant of legal position Avoid improperly worded letters Written notice of known problems Ask for a specific response Obligee

18. Surety Responsiveness Be reasonable in your expectations Be diligent in providing notice & maintaining records Contact insurance commissioner Obligee

19. The Advantages Of Surety Bonds Qualified vendors Competitive pricing Timely contract performance Quality product Financial recourse Insulates public officials Efficient management of public works administration Protect taxpayer dollars Surety Bonds

20. Your Surety Professional Is Your Consultant Financial Security Qualified Principals