The success in any construction business requires that you evaluate and manage risks in the construction project by making fiscally responsible decisions with the aim of timely project completion. The project managers are not willing to gamble on the contractor whose level of experience, commitment to even qualification is uncertain to them. It can be very costly for the project owner should the contractor become bankrupt before the project is complete. It is for this and many other reasons that the contractors have to buy surety bond for contractors in California to increase their business opportunities.
However, before even buying one, it is important to be conversant with the types of bonds on offer. First, there is the bid that is solely concerned with the role of the bidder. It guarantees that the bidder will enter into the contract, make payments as required, and perform the entire set obligation. The payment contract on the other hands covers the suppliers and the sub-contractors ensuring they are paid their due.
The third category is the performance surety. It is there to guarantee that project terms are met, including delivery on time and as required by the terms of the contract. Lastly, there is the ancillary guarantee that focuses on the aspects of project that are integral but are unrelated to performance.
As a contractor, there are many instances when you need the surety bond. As a condition for contract award, any Federal construction that is valued at $150,000 or more will require that contractors buy this insurance. The situation is not very different with the state governments, the municipal governments, and other local authorities. Most large private projects also require similar insurance. Of late, most services contracts and supplier contracts are also asking for similar assurance.
The situation is understandable given that no project developer is ready to gamble with their hard earned money. The public projects have to be completed on time, and this is a requirement by law. It is for this reason that the contractors with surety bonds tends to win more contracts and enjoy business expansion.
The investors (developers) have a lot to enjoy by giving the contracts to the companies that have the surety bonds. First, they are sure that they are dealing with the right company that is fully qualified and has the capacity to carry the project to completion. Normally, the bond companies usually assess the qualification, experience and the capacity of the constructors. Secondly, the investor is at ease because even if the contractor defaults, the cover ensures that another constructor is brought in to complete the project.
The contractors also stand to enjoy many benefits. First, they automatically increase their business opportunity as a result of this cover. In addition to this, they are likely to benefit from financial, technical, and managerial advice from the bond company. Lastly, the subcontractors do not need the mechanic's liens.
The cost normally varies from 0.5% to 2% of the project cost and this can still vary with the experience of the constructor, the project size, location and the duration. In California, there are several companies that offer this product; however, you take time to get value for your money.
However, before even buying one, it is important to be conversant with the types of bonds on offer. First, there is the bid that is solely concerned with the role of the bidder. It guarantees that the bidder will enter into the contract, make payments as required, and perform the entire set obligation. The payment contract on the other hands covers the suppliers and the sub-contractors ensuring they are paid their due.
The third category is the performance surety. It is there to guarantee that project terms are met, including delivery on time and as required by the terms of the contract. Lastly, there is the ancillary guarantee that focuses on the aspects of project that are integral but are unrelated to performance.
As a contractor, there are many instances when you need the surety bond. As a condition for contract award, any Federal construction that is valued at $150,000 or more will require that contractors buy this insurance. The situation is not very different with the state governments, the municipal governments, and other local authorities. Most large private projects also require similar insurance. Of late, most services contracts and supplier contracts are also asking for similar assurance.
The situation is understandable given that no project developer is ready to gamble with their hard earned money. The public projects have to be completed on time, and this is a requirement by law. It is for this reason that the contractors with surety bonds tends to win more contracts and enjoy business expansion.
The investors (developers) have a lot to enjoy by giving the contracts to the companies that have the surety bonds. First, they are sure that they are dealing with the right company that is fully qualified and has the capacity to carry the project to completion. Normally, the bond companies usually assess the qualification, experience and the capacity of the constructors. Secondly, the investor is at ease because even if the contractor defaults, the cover ensures that another constructor is brought in to complete the project.
The contractors also stand to enjoy many benefits. First, they automatically increase their business opportunity as a result of this cover. In addition to this, they are likely to benefit from financial, technical, and managerial advice from the bond company. Lastly, the subcontractors do not need the mechanic's liens.
The cost normally varies from 0.5% to 2% of the project cost and this can still vary with the experience of the constructor, the project size, location and the duration. In California, there are several companies that offer this product; however, you take time to get value for your money.
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