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 Florida construction bond needs.
What Are They?
Florida has its own version of the federal Miller Act that requires bidders and contractors on certain publicly-funded construction bonds to purchase bid bonds, payment bonds, and performance bonds. Private project owners often require the same kinds of construction bonds. The most commonly required construction bonds are:
- Bid Bonds
- Performance Bonds
- Payment Bonds
- Subdivision Improvement Bonds
- Contractor License Bonds
- Maintenance Bonds
Construction bonds provide financial protection for project owners, subcontractors, laborers, and suppliers. They also help guarantee that construction jobs are completed on time and in accordance with contract specifications and requirements.
Who Needs Them?
Florida’s Little Miller Act applies to publicly funded projects with a total value of $100,000 or more, though exceptions may be made at the discretion of the project owner for projects valued below $200,000.
So, if you’re bidding on a contract valued at $200,000 or more, you’ll need to obtain a payment bond and a performance bond. Both must be for the full value of the contract, including subcontracts and the cost of materials. There may be an exception to the “100% of contract value” requirement if you’re bidding on a contract in excess of $250 million, but the minimum required bond amount in such cases is $250 million.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
A signed surety bond agreement is legally binding between three parties:
- The party requiring the bond, such as the project owner or sponsor, is the “obligee”
- The contractor purchasing the bond is the “principal”
- The surety company underwriting and issuing the bond is the “surety”
The surety bond agreement represents a line of credit established by the surety for the principal when the Florida construction bond is used. That’s where the funds will come from to pay valid claims against the bond. When the project owner files a claim against a performance bond, or a subcontractor, laborer, or supplier files one against a payment bond, the surety will first investigate to make sure the claim is valid. If it is, the surety most likely will attempt to negotiate an amicable settlement that allows the project to move ahead and be completed.
When no settlement is possible, however, the surety will activate the principal’s credit line, pay the claim on the principal’s behalf, and wait for the principal to repay the resulting debt. The terms of every surety bond agreement, including Florida construction bond agreements, legally obligate the principal to pay any and all claims.
What Do They Cost?
Florida construction bonds are sold on a premium basis. Premiums are calculated as a small percentage of the required bond amount. That percentage, the premium rate, is set by the surety through an underwriting process that takes into consideration the principal’s personal credit score, personal and business financials, and industry experience. Well-qualified principals typically pay a “standard market” premium rate in the range of 1% to 3%.
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Our surety bond professionals will get you the Florida construction bond you need with the most competitive terms.