Construction projects can often cause a tremendous amount of worry to the project owner. If you are the project owner there is a simple way to prevent the stress and worries caused by hiring a contractor to complete your project. Project owners can make certain that the contractor they hire will perform as expected if they are bonded.
Construction Bonds protect both the project owner as well as the contractor. Contractors can easily obtain a bond within a week so there is no reason one should not obtain a bond. Even if the contractor is inexperienced he is still capable of obtaining a bond.
Contractors who are bonded have a greater advantage over other contractors for many reasons.
Bonds prove to a project owner that the contractor is financially strong, competent and well capable of completing the project without complications. Having a bond will protect the project owner by a process called risk transfer. This means that the insurance company guarantees that the work of the contractor will be provided within the project owners stated budget and time frame requirements through a written contract.
The size of a project is no issue as a construction bond will cover a contractor for any size project whether it is a small project or a very large, time consuming project.
Construction Bonds may include up to five different types of bonds covering any issues that may arise from the starting of a project all the way to the completion of the project and any people involved during the process.
Tender or Bid Bonds are in place to show the project owner that there is a guarantee. This bond is a very important to the contractor since it shows to project owners that the contractor will honor their bid. Contractors who have bid bonds show that they are worthy of hiring because having a bid bond proves that the contractor will provide a Performance Bond if their bid is successful.
Performance Bonds reassure project owners that if the contractor were to default, the owner will not be at a loss. Performance Bonds make a set value of funds available to complete the contract in this event.
Maintenance Bonds also provide a guarantee to the project Owner in a similar way. This type of bonds reassures that the contractor will abide by their obligations of the contract they have signed including any maintenance or defective work obligations.
Stage Payment Bonds, also known as Advancement Bonds/ Advance Bonds, are one of the most beneficial bonds for the contractor as they provide the contractor with a direct service. Advance Bonds allow the contractor advancements in funds to allow him to purchase the initial necessary supplies and materials in order to start on his work without taking a personal loss in cash flow.
Payment Bonds are another important guarantee however they arent necessarily beneficial for either the contractor or the project owner. Payment Bonds are formed to provide security for the subcontractors or other laborers and those supplying the materials under the actual contractor. Having this bond in place guarantees a payment amount to these people which is a protection to them since no other bonds offer protection to these workers.