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 bid bond needs.
What Are Connecticut Bid Bonds?
Connecticut bid bonds, when required, serve multiple purposes:
- They guarantee that the bid submitted by the contractor is accurate.
- They guarantee that the contractor will be able to provide any necessary performance and payment bonds if awarded the contract.
- They provide financial protection for project owners when the winning bidder backs out and does not accept the job.
- They discourage contractors from submitting frivolous bids.
Who Needs Them?
Connecticut’s Little Miller Act does not mandate bid bonds from contractors competing for public works projects. However, many project owners do require bid bonds as a risk management strategy. Bid bonds are more commonly required for public works projects, but private construction project owners may also demand them from bidders. When a bid bond is required, the amount of the bond typically is 5% to 10% of the full bid price.
How Do Connecticut Bid Bonds Work?
A Connecticut bid bond is a legally binding contract among three parties referred to as the obligee, the principal, and the surety:
- The project owner requiring the bond is the “obligee,”
- The contractor purchasing the bond is the “principal,” and
- The party guaranteeing the payment of claims is the “surety.”
In the event of a contractor’s violation that ends up costing the obligee money, the obligee has the right to file a claim and be compensated if the surety determines that the claim is valid. But having guaranteed the payment of valid claims, the surety typically pays the claim initially, transforming the principal’s obligation to pay the claim to the legal obligation to repay the surety. Failing to pay that debt in accordance with the surety’s terms can subject the principal to legal debt recovery action.
How Much Do They Cost?
The premium for a Connecticut bid bond is low compared to the protection it provides. The premium is calculated by multiplying two factors: the required bond amount and the premium rate. The surety sets the premium rate for each principal through underwriting. The principal’s personal creditworthiness is the primary measure of risk—specifically, the risk of the surety not being repaid for claims paid on the principal’s behalf.
A high credit score equates with low risk, which deserves a low premium rate. A principal with a low credit score is viewed as a greater risk and is assigned a higher premium rate.
A well-qualified principal typically will be assigned a premium rate in the range of .5% to 3%.
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