Category: Construction Bond

Amazon HQ2

Amazon’s highly publicized search for an east coast home for its second headquarters, dubbed Amazon HQ2, ultimately resulted in a plan for construction on two sites in Arlington, Virginia. The project is proceeding in two phases at a total cost of more than $2.5 billion. Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your construction bond needs. Phase 1 of Amazon HQ2 Construction of two 22-story towers for Amazon HQ2 started in January 2020 on what has become known as the Metropolitan Park site—Phase 1 of the project—with completion on track for mid-2023. In addition to the two solar-powered office towers, the Amazon HQ2 site will include more than 50,000 square feet of retail space, including a daycare center, a 2-acre public park, and a meeting center available for use by the community at no cost. The buildings’ rooftops will feature a café, dog run, and urban farm terrace. Phase 2 of Amazon HQ2 Phase 2 involves the construction of “The Helix ” on the PenPlace site, which required the FAA...

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California High-Speed Rail

The California High-Speed Rail (CAHSR) grew out of a vision of a “bullet” train spanning the 800 mile distance from Sacramento to San Diego. The environmental benefits of a system of zero emission trains powered entirely by renewable energy are undeniable. When completed, the electrified high-speed rail will keep more than 3,500 tons of pollutants out of the air per year. Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your construction bond needs. When Phase 1 of the California high-speed rail system is completed, CAHSR will connect Los Angeles and San Francisco, allowing passengers to make the 380 mile trip, without transfers, in 2 hours and 40 minutes, with a maximum speed of more than 200 miles per hour. Phase 2 will extend the California High-Speed rail system southward to San Diego and northward to Sacramento. The project owner is the state of California, through the California high-speed rail Authority (CHSRA).  The Cost of the California High-Speed Rail The project is proceeding in segments as funding becomes available, with different contractors...

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Performance Bonds for Private Construction

Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your construction bond needs. What Are Performance Bonds? Performance bonds are surety bonds commonly used in the construction industry to protect project owners against the risk of default by contractors who cannot complete a job under contractual requirements. A performance bond transfers that risk from the project owner to a “surety,” typically an insurance company or division of an insurance company. Surety bonding dates back over 4,000 years to the ancient Babylonians and has developed over the millennia to its current form. Since 1893, law has mandated performance bonds for federally funded projects. Under the Miller Act of 1932, performance bonds and payment bonds are required for all federal construction contracts valued in excess of $100,000. At the state level, similar legislation, commonly referred to as “Little Miller Acts,” requires both performance and payment bonds for state-funded public works projects. Today, performance bonds, once exclusively used in taxpayer-funded construction, are increasingly required by private construction project owners. Why Are Performance Bonds Now Being Required...

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To Bond, License and Insure?

Starting your own construction business can sometimes be a leap of faith. But that faith in your business is stronger if you learn about the industry.  For example, it is important to know the benefits of being a licensed, bonded and insured construction company. Why should I be licensed and apply for permits? The simple answer is for protection, for you and your customers. It may be easier to cut corners and not apply for permits or licenses. But, if you want to have a long standing and respective business, licenses and permits are the way to go. First, you will need a general business license.  Beyond that, it is important to check with your local government and state offices to see which other license you may need. Permits are important because they help you to maintain valid parameters. By pulling a permit, you have sought the approval of your local government offices to perform the work that your customer wants. What about insurance, do I need insurance? How many insurances you need depends on the work you perform. If you directly employ workers, then you will need an insurance to protect yourself. If you drive your truck for...

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By M L

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A Quick Guide to Surety Bond Terms

Once you have made the decision that a surety bond can help grow your business, knowing the basic construction surety bond terms can help to expedite the application process.  And, it also helps to know which bond you will need for specific parts of the project.  Yet, if looking for a more comprehensive description, our other blogs on the topic can help. What is a Bid Bond? A project owner may require this bond when bidding for a job.   Usually needed in public construction projects, it ensures that the bidder is able to complete the job at their proposed bid. What is a Payment Bond? This bond protects those associated with the jobs.  This may include other contractors, subcontractors, laborers and material suppliers. What is a Performance Bond? This ensures that the job will be completed as per the contractual stipulations. What is an Ancillary Bond? Not used as often as the previous bonds, this bond covers specifications not mentioned in the contract.  For example, stylistic elements. What is a Subdivision Bond? A project owner may require this bond to cover such projects as replacing a sidewalk or sewer system. These five terms can help you to decide which...

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Surety Bond Vs Letter Of Credit – What’s The Difference?

There are many financial products that help a construction company to grow, both in the private and public sector.  Two of these products, a surety bond and a line of credit, can be helpful in becoming more successful.  Knowing the difference between the two can help your business to grow. Surety Bonds vs Lines of Credit To start, both surety bonds and lines of credit (LOCs) provide financial protection. Yet surety bonds tend to take that protection a step further.  By definition, a surety bond is a three party agreement between the project owner, the surety bond producer and the contractor.  Two of the most utilized surety bonds in the industry are performance bonds and payment bonds.  A performance bond ensures that the contractor upholds the contractual obligations specified in the contract.  A payment bond guarantees that the contractor pays all associated with the project.  This can be anyone from laborers to subcontractors, material suppliers and other employees as specified in the contract.  A LOC is a cash guarantee.  It allows the owner to call upon it on demand.  It works as a payment to the owner, but is an interest loan for the contractor. A surety bond is based...

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By M L

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ClaimsSurety Bonds

How Claims Hurt

We’ve emphasized, in previous blogs, that a contractor has control in avoiding claims.  The best way to avoid having a claim filed is to make sure that the contractor fulfills and documents all contractual obligations.  But, if the contractor is not able to fulfill the contractual obligations, a claim may be filed.  This will hurt the  reputation of the contractor in many ways. The Financial Burden of a Claim First of all, the financial burden will be evident once the contractor is found to have defaulted on the contract.  The contractor may have to pay the full amount.  They may also have to pay any legal fees associated with the claim.  A surety bond is not meant to protect the contractor. Instead it ensure the project owner that they will not lose out on money if the contractor defaults on the contract.  If the surety bond producer deems that the contractor has defaulted on the contract, they will pay the project owner.  They will then seek reimbursement from the contractor. The Risk of Ignoring Claims But what if the contractor decides not to pay the claim? They may feel they weren’t in the wrong or may not have the financial...

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By M L

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The Importance of a Work In Process Schedule for the Contracting Company and the Surety Company

A Work in Process schedule (WIP) helps contractors document the progress of their project.  A WIP also helps the surety company to evaluate the progress of the project as well.  A well-documented WIP can help the contracting company earn future approval for surety bonds. In a general WIP, some of the things documented are the contract price, billings to date, costs incurred to date, estimated completion cost and estimated gross profit. These help the contractor show that they are completing the project on time and without additional costs. The reasons a WIP is important for a surety company is that it helps to monitor profitability, any errors and profit fade and gains that may happen.  The surety company is also able to evaluate billing practices of the contracting company.  A WIP also helps to back up the contractor’s financial strength on the project. It is important to have Certified Public Accountant (CPA) organize the contractor’s financial records, to provide to the surety company. Summary: A WIP is important for both the contractor to stay on schedule and document any shortcomings.  It is important also for the surety company to monitor and evaluate progress and any discrepancies. A proficient WIP can help...

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By M L

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Warning Signs that may Deter your Bond being Processed

Many contractors find that the surety bond process can be complex. But, having a competent and knowledgeable surety bond producer is the first step to making sure your project will get underway. By answering the following questions, a contractor may be able to determine if there may be a delay in approval. Questions to Consider: 1. Is there already a claim open with the current surety? If another application has not yet been approved, that may be a warning sign that there is a reason for the delay. The best way to correct this is to (a) resolve any issues with the surety bond claim and (b) work with the surety bond producer, if both parties cannot resolve the issue on their own. 2. Is the project within the realm of the contractor’s expertise? If not, the underwriter may worry that the lack of  understanding of the project may delay it.  The best way to remedy this is to explain why the contractor is bidding on the project, how the contractor will avoid and/or solve any potential risks and why the contractor is seeking this particular project. 3. Is the project outside of the home turf? If the contractor is bidding on a...

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By M L

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