Kansas 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 Kansas Performance Bonds?
Kansas performance bonds help maintain integrity and quality in the construction industry. They obligate contractors to meet the performance standards and specifications laid out in a construction contract. And in the event of default or other contractual violation, they require the contractor (known as the bond’s principal) to compensate the project owner (called the “obligee”) for the resulting monetary damages.
Who Needs Them?
Kansas's “Little Miller Act,” officially called the Kansas Fairness in Public Construction Act, is the state’s version of the federal Miller Act. It requires performance bonds (and payment bonds) from contractors before they can be awarded state-funded projects valued in excess of $100,000. Every Kansas performance bond must be in an amount equal to the full contract value.
Privately funded construction projects are not subject to the Little Miller Act. However, many private project owners require performance bonds from their chosen contractors, particularly for larger projects.
How Do Kansas Performance Bonds Work?
There are three parties to every Kansas performance bond. The third-party, in addition to the obligee requiring the bond and the principal purchasing the bond, is the bond’s guarantor (referred to as the “surety”). The principal is legally obligated to pay valid claims against the bond, but contractors typically don’t have enough liquidity to pay a claim immediately.
The surety guarantees the payment of claims by agreeing to extend credit to the contractor if that becomes necessary. The surety will pay the claim initially, and the principal must then repay the resulting debt in accordance with the surety’s credit terms. The surety will initiate legal debt recovery action if not repaid.
How Much Do They Cost?
The annual premium for a Kansas performance bond is a small percentage of the required bond amount. The surety determines what that percentage, the premium rate, will be for each principal on a case-by-case basis through underwriting. The underwriting goal is to assess the risk of the surety not being repaid for a claim paid on behalf of the principal, as measured by the principal’s personal credit score.
A bond applicant with a high credit score is deemed creditworthy and a low risk to the surety. Conversely, someone with a low credit score presents a higher risk of non-repayment. Low risk deserves a low premium rate, while higher risk calls for a higher rate.
A well-qualified principal will typically be assigned a premium rate in the range of .5% to 3%.
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