PERFORMANCE BONDS
Performance and payment bonds are also referred to as ‘contract’ or ‘final’ bonds and are usually required on all public sector jobs and many private ones. If the owner of a project requires a bid bond, they customarily also require a performance and payment bond. The contractor is usually required to file the performance and payment bond within 30 days of the award date or prior to any contract payment.
The performance bond is a non-cancellable commitment that guarantees the faithful performance of the referenced contract within the set terms and conditions. This bond covers one particular contract and is usually executed in conjunction with a payment bond.
The
premium rate for a performance/payment bond is determined by the surety
company and is dependent on the contract price, type of work and strength
of the contractor. The rate can range from less than 1% to 3% of the total
contract price. The payment bond is added at no additional charge. Premium
is based on the actual job not lasting more than 12 months and carrying
a maintenance guarantee period of 12 months. A bond for a job that has
a completion time in excess of 12 months and/or an extended maintenance
guarantee period will accrue a surcharge. The premium is also subject
to change based upon the final contract price.