Bonds, before they are issued, require assessment from a financial institution or a crediting firm. The project’s risk is calculated, which includes the contractor’s track record in completing projects in a timely manner and documents supporting financial stability for all the parties involved. From there, the underwriter decides if a bond is to be issued or not.
What is the Significance of Bid Bonds?
The government mandates projects to have bonding for construction if the agreed payment reaches a particular amount, so be prepared with as much supporting documents as possible.
Bonding for construction, in the form of a bid bond, is required for most projects. It formalizes the agreement among the project owner, the bonding company and the contractor.
For the owner, the bond signifies that the project’s pre-requirements have been approved by the bonding company. Funding the entire operation shouldn’t come as a problem, once the project passes the bonding company’s assessment.
For the contractor, he is expected to perform the designated tasks at the price stated on the contract. Replacing his services comes easy if the owner avails of a performance bond.
Bid bonds must be submitted upon bidding; otherwise, the bid may not be approved. Promptness is absolutely necessary to avoid complications and delays in the project.