Bonds for Highway, Street, and Bridge Contractors

When Might Highway, Street, and Bridge Contractors Require Bonding?

Some general contractors may require bonding as it provides extra financial security and recourse if the contractor doesn’t fulfill the contract terms or pay subs/suppliers. Highway, street, and bridge contractors may also be required to post bonds on municipal, state, or federal contracts.

Types of Bonds a Highway, Street, and Bridge Contractor Might Need

The specific types of bonds required by bridge, highway, and street contractors can vary depending on the scope and nature of their projects. However, some common types of bonds that contractors in this industry may require include:

Bid Bonds provide financial protection to the owner or project developer if a bidder is awarded a contract but fails to enter into the contract and/or provide the required performance and payment bonds needed to move forward. Read more
Performance bonds guarantee that the contractor will complete the construction according to the contractual obligations. If a contractor fails to do so and is defaulted, the project owner can make a claim on the bond to access funds that can be used to pay another contractor to finish the job. Read more
The payment bond guarantees the payment of all subs and suppliers on the project. Read more
A Maintenance bond protects the owner of a completed construction project for a specified time period against defective materials and workmanship that could surface later if the project was completed incorrectly. Read more

What a Highway, Street, and Bridge Contractor Should Look for With Bonding

When bridge, highway, and street contractors explore bonding options, many factors should be considered.
  • Firstly, assessing the bonding capacity is essential, encompassing both single project limits and aggregate bonding capacity. This evaluation ensures the ability to handle larger projects and support business growth effectively, providing the necessary financial backing to fulfill contractual obligations with confidence in this industry.
  • Moreover, a higher bonding capacity offers increased flexibility when bidding on public works projects, enhancing competitiveness within the market for bridge, highway, and street contractors.
  • Additionally, considering the cost of bonds, including the rating structures provided by surety companies, is vital. Opting for competitive rating structures can help minimize bond costs and improve the overall profitability of projects in this sector.
  • Bridge, highway, and street contractors should also seek surety providers with a strong reputation for reliability and responsiveness within the industry.
By carefully evaluating these factors, contractors can make informed decisions to secure the most suitable bonding arrangement for their specific business needs.

How Much Do Bonds Cost for a Highway, Street, and Bridge Contractor?

The premium for any contractor’s bond is calculated with two factors: the bond amount and the premium rate. The bond amount for a particular bond is determined by the obligee, and the premium rate is assigned by the surety on a case-by-case basis.

The creditworthiness of the principal, evaluated through their business financials, previous construction experience, and personal credit score, is the primary factor influencing the premium rate. A stronger underwriting case reduces the contractor’s risk, resulting in a lower premium rate. In practice, the surety will pay a valid claim on the principal’s behalf, to be repaid according to specific credit terms established by the surety. A highly qualified principal usually receives a premium rate ranging from 0.5% to 3%.

How Do I Get Setup for Bonding as a Highway, Street, and Bridge Contractor?

In general, there are two methods for applying for a construction surety bond:

First way Fast Track Application

This is an application which is determined by the individual’s credit history. A Fast Track application can be used for projects or contracts under $600,000. The fast track application should be submitted with the following items:

  • Copy of Contract or Bid Specs
  • Job Cost Breakdown

Second way Standard Bond Application

This application is to establish a larger surety program for projects over $600,000. The Standard Bond Application will require:

  • Financial Statements
  • Brief Questionnaire

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