surety bonds
DESCRIPTION
Surety Bonds. Performance Bond Payment Bond. Benefits Of Bonding Subs. Prequalified subs Risk Transfer Improves contractor’s credit standing. Prequalification Process. Business Operations. Financial Strength. Experience. Sub Documents. Exposure & Progress. Size & Location. - PowerPoint PPT PresentationTRANSCRIPT
Surety Bonds
• Performance Bond
• Payment Bond
Benefits Of Bonding Subs
• Prequalified subs
• Risk Transfer
• Improves contractor’s credit standing
BusinessOperations
FinancialStrength
Experience
SubDocuments
Exposure &Progress
Size & Location
AbilityTo 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 Company www.ambest.com
Dun & Bradstreet www.dnb.com/us
Standard & Poor’s www.standardandpoors.com
Moody’s www.moodys.com
Treasury Dept. www.fms.treas.gov/c570/c570.html
State Insurance Dept.www.naic.org/state_web_map.htm
Surety Rates
Bid BondUsually no or minimal charge
Performance Bond½ - 2% of contract price
Payment BondUsually 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
AccountingIssues Management
Issues
PersonnelIssues
PerformanceIssues
UnrealisticGrowth 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 Office1828 L St. NW, Suite 720
Washington, DC 20036
202-686-7463 | Fax 202-686-3656
www.sio.org | [email protected]