Common Bonds in the Construction Industry

Common Bonds in the Construction Industry

Despite bonds being common in the construction industry, there are many contractors and professionals within the industry that don’t understand them. You can consider bonds to be a financial guarantee. Here is what you need to know about common types of construction bonds.

Bid Bonds

Sometimes, when a project owner has a job for contractors, he or she will open up bidding on the project. If you want to bid on a job, the owner may ask you to obtain a bid bond. This is a guarantee that you will enter into the contract for the bid amount.

Performance Bonds

A performance bond protects the project owner if there are any problems with the contractors. In the contract, you guarantee that your team will do a quality job. If the project takes too long or if the owner is unsatisfied with the work, the performance bond will repay him or her.

Payment Bonds

If a contractor does not pay subcontractors or other team members, then the project owner could legally have to fit the bill. A payment bond protects the owner from these payments. It ensures that you will pay your team and your suppliers.

There are naturally a lot of different risks in the construction industry. Insurance, as well as bonds, protects your company and those who you work with.