Georgia Performance Bonds
Surety Bond Professionals is a family owned and operated bonding agency with over 75 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your performance bond needs.
What Are Georgia Performance Bonds?
Georgia performance bonds provide financial protection for construction project owners who otherwise would have no way to recoup the losses caused by a contractor’s default or failure to complete a job in accordance with contract specifications. It can cost a project owner a great deal if work must be redone or another contractor has to be brought in to finish the project.
Who Needs Them?
Under Georgia's “Little Miller Act,” performance bonds are required from contractors awarded contracts for state-funded public projects valued in excess of $100,000 (or less at the contracting entity’s discretion). The amount of any performance bond must be equal to the contract value. No contract can be signed until a performance bond (and a payment bond) is in place.
Georgia’s Little Miller Act does not apply to privately funded construction projects. Nonetheless, many private project owners require their contractors to furnish performance bonds, especially for high-value contracts.
How Do Georgia Performance Bonds Work?
The three parties to every Georgia performance bond are known as:
- The “obligee” (the project owner)
- The “principal” (the contractor)
- The “surety” (the bond’s guarantor)
When and if the obligee files a claim against a performance bond, the surety will investigate the situation and determine whether the claim needs to be paid. The principal is legally obligated to pay a valid claim, but the surety has guaranteed that payment will be made. The accepted practice is for the surety to pay the claim initially. That means the principal now owes the claim amount to the surety and must repay it in accordance with the surety’s credit terms.
How Much Do They Cost?
Georgia construction bonds are sold for an annual premium that’s a small percentage of the full bond amount. That percentage is the premium rate, which is assigned by the surety based largely on the principal’s personal credit score.
The reasoning is that someone with good credit is financially responsible and, therefore, likely to repay any debt to the surety—a low-risk scenario. Someone with lesser credit poses a higher risk to the surety, which warrants 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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