What are construction bonds? No, we're not talking about Agent 007, but rather another type of bond that can rescue your project nonetheless!
contractor without re-raising all the funds paid to the initial contractor.
http://constructionperformancebond.com/ - bonding for contractors: "9 out of 10 of our clients we have placed have been turned down in the past by a bank or other construction performance bond or payment bond source, and we have been able to help them all."
http://www.aia.org/contractdocs/about/, and http://www.aia.org/contractdocs/referencematerial/
"Surety bonds for construction contracts", Jeffrey Russell: ASCE Press, Reston, Va. ISBN 0-7844-0426-7.
Performance Bond
What happens if the contractor you hired goes out of business? Or just decides to walk away from the project? If your project has a performance bond, you can be glad you required it, and you can hire anothercontractor without re-raising all the funds paid to the initial contractor.
Payment Bond, Release of Liens
Similarly, what if your contractor doesn't pay their subs? Your property may be at risk of having a lien filed against it - meaning somebody else claims ownership of a certain amount of what you thought was YOUR property! Two ways to help avoid this - a payment bond is a related type of surety bond that pays for materials and subs if the contractor does not complete the job. Also, requiring a release of liens form (closely related is the payment of debts and claims form) e.g. the AIA G706 and G706A, to be executed by the Contractor helps to avoid surprises. This certifies that everyone who needs to be paid has been paid. (Real life example of why this matters -- see Durability+Design March 2014 article here.)Bid Bonds
There are other types of bonds as well, such as the bid bond which guarantees that after being awarded the bid that a contractor will execute the contract. You wouldn't think this would be a problem, but what if a bidder is surprised by the award of too many contracts at once and exceeds their capacity?Which Bonds Do I Really Need?
The flip side of all this is that bonding adds administrative cost to the project. An Owner must choose either do they want to mitigate the risk and pay for that mitigation in the total cost of the Project, or accept the risk that one or more of these bonds represent and save some money. That is a choice unique to each type of project and the owner's preferences and strategy. A positive side effect of bonding can be the quality level or at least the experience and financial stability of the contractors who are able to bid the work.More Information
http://swiftbonds.com/performance-bond/ - "We are the nation's leading provider of performance bonds." Lots of information here about how bonds work.http://constructionperformancebond.com/ - bonding for contractors: "9 out of 10 of our clients we have placed have been turned down in the past by a bank or other construction performance bond or payment bond source, and we have been able to help them all."
http://www.aia.org/contractdocs/about/, and http://www.aia.org/contractdocs/referencematerial/
"Surety bonds for construction contracts", Jeffrey Russell: ASCE Press, Reston, Va. ISBN 0-7844-0426-7.
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